25 February 2020
A sharp rise in industrial output helped China report better-than-expected GDP growth figure for the three months to March. Photo: Reuters
A sharp rise in industrial output helped China report better-than-expected GDP growth figure for the three months to March. Photo: Reuters

China first-quarter GDP growth tops expectations at 6.4%

China’s economy grew 6.4 percent in the first quarter of 2019 compared to the same period last year, defying expectations for a further slowdown, official figures released on Wednesday showed.

A sharp rise in industrial production and signs of improvement in consumer demand, as well as faster growth in retail sales and investment, helped the gross domestic product figure come in slightly ahead of market expectations, Reuters reports.

The upbeat data is likely to add to optimism that the world’s second largest economy may be starting to stabilize.

However, analysts say it is too early to call a sustainable turnaround, and see further policy support as necessary to keep the momentum going.

Beijing has ramped up fiscal stimulus this year to bolster growth, announcing billions of dollars in additional tax cuts and infrastructure spending, while Chinese banks lent a record 5.8 trillion yuan (US$865 billion) in the first quarter.

“We think we need more evidence to call a full-fledged recovery of the Chinese economy. Our view for the economy is still cautious,” Reuters quoted Jianwei Xu, senior economist, Greater China at Natixis in Hong Kong, as saying.

“We think it (the stronger-than-expected data) is somewhat linked to the stimulus, but we can’t attribute it all to it.”

Analysts polled earlier by Reuters had expected GDP growth to slow slightly to 6.3 percent in the three months to March, the weakest pace in at least 27 years.

Government support measures are gradually having an effect on the economy, although it still faces downward pressure, Mao Shengyong, spokesman at the National Bureau of Statistics, cautioned on Wednesday.

First-quarter growth was supported by a sharp jump in industrial production, which surged 8.5 percent in March from a year earlier, the fastest pace in over four-and-a-half years.

The reading easily beat analysts’ estimates of 5.9 percent and the 5.3 percent seen in the first two months of the year.

Construction materials such as steel and cement showed strong gains.

Industrial output will likely maintain steady growth, with exports expected to keep expanding, Mao said.

China’s exports rebounded more than expected in March. But economists have cautioned that the export gains could have been due to seasonal factors rather than a recovery in sluggish global demand.

Tit-for-tat U.S-China tariffs also remain in place, though the two sides appear to be nearing a deal that could end their nine-month-long trade war.

The jump in industrial output was also somewhat at odds with trade data last week, which showed imports shrank for the fourth straight month, pointing to still sluggish domestic demand.

Retail sales rose 8.7 percent in March, also exceeding analyst’s estimates of 8.4 percent growth and the previous 8.2 percent.

Sales were led by sharply higher demand for home appliances, furniture and building materials, pointing to strength in China’s residential property market.

New home prices grew slightly faster in March after slowing in the previous month, data on Tuesday showed, bolstered by price gains in smaller cities.

Auto sales extended their decline in March, falling 4.4 percent from a year earlier compared with a 2.8 percent drop in the previous month.

The fall in China’s auto output and sales are expected to ease and return to growth, the statistics bureau’s Mao said.

Fixed-asset investment expanded 6.3 percent in January-March quarter from a year earlier, in line with estimates and picking up from the previous period.

Real estate investment rose 11.8 percent in the first three months, quickening slightly from the 11.6 percent gain in the two months to February.

Analysts polled by Reuters expect China’s economic growth to slow to a near 30-year low of 6.2 percent this year, as sluggish demand at home and abroad and the Sino-US trade war continues to weigh on activity despite a flurry of support measures.

The government aims for economic growth of 6.0-6.5 percent in 2019.

On a quarterly basis, GDP in the first quarter grew 1.4 percent, as expected, but dipped from 1.5 percent in October-December.

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