17 July 2020 09:07 am
REUTERS: China’s economy returned to growth in the second quarter after a deep slump at the start of the year, but unexpected weakness in domestic consumption underscored the need for more policy support to bolster the recovery after the shock of the coronavirus crisis.
Gross domestic product (GDP) rose 3.2 percent in the second-quarter from a year earlier, the National Bureau of Statistics said yesterday, faster than the 2.5 percent forecast by analysts in a Reuters poll, as lockdown measures ended and policymakers ramped up stimulus to combat the virus-led downturn.
The bounce was still the weakest expansion on record, and followed a steep 6.8% slump in the first quarter, the worst downturn since at least the early 1990s.
“As we previously highlighted, policy support is still needed despite recovering growth momentum,” Betty Wang, ANZ bank’s senior
China economist.
“The possibility of resurgences in local COVID-19 cases, global economic uncertainty and the deteriorating China-U.S. relationship all pose downside risks to China’s H2 growth outlook,” Wang said.
Those risks were partly reflected in separate retail data that showed Chinese consumers kept their wallets tightly shut, pointing to a bumpy outlook at home and overseas, as many countries continue to grapple with the COVID-19 pandemic - led by surging infections in the United States.
Though June indicators and GDP numbers largely beat expectations, Rodrigo Catril, a foreign exchange strategist at NAB in Sydney, said they also revealed “the China consumer remains behind in terms of the recovery story.”
“It’s very much a story of government stimulus-led recovery, which is very much focused on the industrial side. The consumer remains very cautious. That cautiousness is something the market is looking at in terms of countries where the consumer plays a bigger role, so that’s obviously relevant for the U.S. as well.”
Retail sales were down 1.8 percent on-year in June - the fifth straight month of decline and much worse than a predicted 0.3 percent growth, after a 2.8 percent drop in May.
Domestic job losses have been one of the worries for consumers, as many businesses struggled to stay in the black.
In the first half of the year, the economy contracted 1.6 percent from a year earlier, underscoring the sweeping impact of the virus which first emerged in China late last year and has killed over 583,000 people worldwide.
In the first half of the year, the economy contracted 1.6 percent from a year earlier, underscoring the sweeping impact of the virus which first emerged in China late last year and has killed over 583,000 people worldwide.