BEIJING (Reuters) – China’s economy contracted sharply in the second quarter due to the impact of multiple lockdowns on activity, official statistics showed on Friday.
Gross domestic product (GDP) fell 2.6% over the April-June period compared to the previous three months, a much more marked drop than expected since the Refinitiv consensus gave it down 1.5%.
In the first quarter, GDP in the world’s second-largest economy rose 1.4% according to revised official data.
On an annual basis, growth thus falls to 0.4% whereas it was expected at 1.0% by economists and analysts polled by Reuters and it reached 4.8% in January-March.
Over the first half as a whole, it stood at 2.5%, thus well below the objective of around 5.5% over the whole of the year set by Beijing.
“The Chinese economy is very close to sinking into stagflation even if the worst is over after the May-June period. We cannot exclude the possibility of a recession, i.e. two consecutive quarters of contraction”, commented Toru Nishihama, chief economist of the Dai-ichi Life Research Institute in Tokyo.
“Given the weak growth, the Chinese government should deploy economic support measures from now on to revive its faltering growth, but the obstacles to a further cut in interest rates from the BPC (People’s Bank of China) are high as this would fuel inflation, which has so far remained relatively low.”
According to a Reuters survey, Chinese growth is expected to slow to 4.0% for the whole of this year.
Official statistics for the month of June alone, also published on Friday, show industrial production growth of 3.9% compared to June 2021, after +0.7% in May. The Reuters consensus was for a 4.1% rise.
Retail sales meanwhile rose 3.1% year on year in June, their biggest rise in four months, when they were expected to be unchanged after a 6.7% drop in May.
“Retail sales growth shows that lockdowns have been the biggest drag on consumption and demand rebounded significantly once Shanghai and other major cities emerged from lockdown in late May,” said Jacob Cooke, chief executive. of WPIC Marketing + Technologies in Beijing.
Investment in fixed assets increased by 6.1% over the first six months of the year compared to the corresponding period last year, slightly more than expected since the consensus was for +6%.
(Report Kevin Yao, Stella Qiu and Ellen Zhang, French version Marc Angrand)