[Economics] The Chinese economy contracts 2.6% quarterly and exacerbates fears about global growth

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Restrictions and real estate problems weigh down the world's second economy

The Chinese economy contracted sharply in the second quarter, reflecting the huge toll on activity from the widespread lockdowns linked to the Chinese government's Covid-zero policy. The figures, a 2.6% quarter-on-quarter contraction, add to an increasingly bleak global growth picture.

 

The figure is well below the 1.4% growth forecast by analysts. And they arrive at a time of fear of a global recession in the face of widespread increases in interest rates to curb inflation that is already punishing private consumption around the world. In year-on-year terms, GDP for the April-June quarter grew a tepid 0.4%, below expectations for a 1.0% increase, according to a Reuters poll of analysts.

"The Chinese economy has been on the verge of falling into stagflation, although the worst has passed since the May-June period. The possibility of a recession can be ruled out," Toru Nishihama, chief economist at the Dai Research Institute, told Reuters. - ichi Life in Tokyo. "Given weak growth, the Chinese government is likely to use stimulus measures, but the hurdles are high for the PBOC to cut interest rates further."

Full or partial lockdowns were imposed in the country's main hubs in March and April in March and April, including the commercial capital Shanghai, which brought down a 13.7% year-on-year contraction in GDP in the latest quarter.

 

Although many of those closures have since been lifted, and June data offers signs of improvement, analysts are not expecting a quick economic recovery. China maintains its strict Covid-zero policy, the country's real estate market is in a deep slump, and the outlook for the global outlook is negative. The imposition of further lockdowns in some cities and the arrival of the highly contagious BA.5 variant have put pressure on businesses and consumers to worry about a prolonged period of uncertainty.

Bounce in June?
Analysts believe the central bank's room to ease policy further could be limited by concerns about capital outflows, as the US Federal Reserve, and other economies, aggressively raise interest rates. interest to fight rising inflation. Rising consumer prices in China, while not as sharp as elsewhere, may also help limit monetary policy easing-

 

June activity data, also released on Friday, showed China's industrial production grew 3.9% in June from a year earlier, accelerating from 0.7% in May, though down 4, 1% expected. Meanwhile, June retail sales rose 3.1% from a year earlier and marked the fastest growth in 4 months, after authorities lifted a two-month lockdown in Shanghai.

The growth in retail trade indicates that the lockdown has been the main drag on demand, which clearly recovered once Shanghai and other major cities emerged from lockdowns, analysts say.

The weak recovery in China's capital-starved real estate sector is coming under pressure from a growing number of home buyers protesting delays in off-plan purchases. Data on Friday showed home prices fell 0.5% from a year ago. Real estate investment fell 9.4% in June, worsening May's 7.8% decline, while property sales extended their decline by another 18.3%.

 

Link: https://cincodias.elpais.com/cincodias/2022/07/15/economia/1657865030_979156.html