© Reuters. FILE PHOTO: Picture of a construction site in Beijing, China April 14, 2022. Picture taken April 14, 2022. REUTERS / Tingshu Wang
BEIJING (Reuters) – China’s economy grew faster than expected in the first quarter, data showed on Monday, up 4.8% year-on-year, but risks a sharp slowdown in the coming months has increased due to the limited sweep of COVID-19 and the devastating war in Ukraine.
The downturn in activity is evident in the March indicators, which show a strong hit to demand and suggest a tough road ahead.
Gross domestic product (GDP) for January-March was forecast to grow 4.4% from a year earlier, according to a Reuters poll of analysts, up from 4.0% in the fourth quarter of last year.
On a quarterly basis, GDP grew 1.3% in January-March, compared with expectations for a 0.6% increase and a revised 1.5% increase in the previous quarter.
Rising global risks from the war in Ukraine, widespread COVID-19 lockdowns and a weak property market are putting the world’s second-largest economy on hold, and some economists say recession risk is increasing.
Separate data on March activity showed that retail sales fell last month on a year-over-year basis due to rampant COVID curbs across the country. It fell 3.5%, well below expectations for a 1.6% drop and a 6.7% gain in January and February.
The industrial sector grew better than expected with output up 5.0% from a year earlier, compared with forecasts for a 4.5% increase. This is still down from the 7.5% increase in the first two months of the year.
Investment in fixed assets rose 9.3% year-on-year in the first quarter, compared with an 8.5% gain according to a Reuters poll but down from a 12.2% gain in two months. the begin of the year.
Analysts say the April data is likely to be worse, with lockdowns in the central business district of Shanghai and elsewhere lingering.
The job market is showing signs of stress. China’s nationwide survey-based unemployment rate stood at 5.8% in March, the highest since May 2020 and up from 5.5% in February.
The government’s determination to stem the spread of record-breaking COVID-19 cases has clogged highways and ports, stranded workers and closed countless factories – disruption is happening in the region. global supply chain for goods from electric vehicles to iPhones.
Late on Friday, the People’s Bank of China announced it would cut the amount of cash banks must hold in reserve for the first time this year, freeing up about 530 billion yuan ($83.25 billion) in liquidity. long-term account to reduce the sharp decline. economic growth.
The move was largely expected after the State Council, or cabinet, said on Wednesday that monetary policy tools – including cuts to banks’ reserve requirement ratios (RRRs) goods – should be used promptly.
The government has announced more fiscal stimulus measures this year, including stepping up the issuance of local bonds to fund infrastructure projects and cutting taxes for businesses.
But analysts aren’t sure if a rate cut will do much to stem an economic slowdown in the near term, as factories and businesses struggle while consumers remain cautious. in spending. More aggressive easing could also trigger capital outflows, putting more pressure on China’s financial markets.
China has set a target of slower economic growth of around 5.5% this year due to difficulties, but some analysts say that could be difficult to achieve without stimulus measures. prefer to be positive.