China’s First-Quarter GDP Above Expectations, But March’s Weakness Raises Concerns About Outlook

China’s economy slowed in March as consumption, real estate, and exports all took a hit, putting a damper on faster-than-expected first-quarter growth estimates and weakening an outlook already weakened by COVID-19 restrictions and the Ukraine conflict.

The severe new coronavirus rules, which came into effect at a time of increased geopolitical threats, have exacerbated supply and commodity cost pressures, leaving Chinese policymakers on a tightrope as they try to encourage growth without jeopardising price stability.

The National Bureau of Statistics said on Monday that GDP increased by 4.8 per cent in the first quarter compared to the same period a year ago, exceeding experts’ predictions of 4.4 per cent and increasing from 4.0 per cent in the fourth quarter.

The headline statistics were improved by a surprise robust start in the first two months of the year, with GDP rising 1.3 per cent quarter-on-quarter in January-March, compared to estimates of 0.6 per cent and a revised 1.5 per cent growth in the previous quarter.

Analysts predict that April statistics will be worse, as lockdowns in Shanghai’s business centre and elsewhere continue, causing some to warn of mounting economic risks.

“Further impacts from lockdowns are imminent, not only because there has been a delay in the delivery of daily necessities, but also because they add uncertainty to services and factory operations that have already impacted the labour market,” said Iris Pang, Greater China chief economist at ING.

“We may need to revise our GDP forecasts further if fiscal support does not come in time.”

The blue chip CSI300 index was down 0.6 percent, while the Shanghai Composite Index was down 0.5 per cent, possibly in response to the March data and a bleak outlook.

Retail sales fell the greatest on an annual basis in March since April 2020, owing to widespread COVID bans across the country.  They dropped 3.5 per cent, below projections of a 1.6 per cent drop and a 6.7 per cent growth in January-February.

In March, a typically solid month for the labour market as manufacturers resume hiring after the Lunar New Year vacation, the job market is already showing indications of strain. In March, China’s overall survey-based jobless rate hit 5.8 per cent, the highest since May 2020, while the rate in 31 major cities set a new high of 6.0 per cent.

The industrial sector fared better, with production climbing 5.0 per cent from a year ago, versus predictions of a 4.5 per cent increase. The growth was down from 7.5 pe rcent in the first two months of the year.

 Fixed asset investment increased 9.3 per cent year on year in the first quarter, compared to an estimated 8.5 per cent gain but down from 12.2 percent growth in the first two months.

Capital Economics and Nomura analysts believe the official GDP statistics may have overstated the decline in the third quarter. 

Capital Economics claims that the increase in the services production index for Q1 does not correspond to the growth of the services sector in GDP data, while Nomura claims that some of the March data, such as industrial production, is difficult to reconcile with many other indicators of industrial activity.

According to reports, home sales by value fell 26.2 per cent year on year in March, the greatest loss since January-February 2020, indicating a growing crisis in the property sector.

(Adapted from

Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Sustainability

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