China sufre una fuerte contracción en segundo trimestre y ensombrece el panorama

China’s economy contracted sharply in the second quarter, highlighting the colossal cost to activity of the Covid lockdowns and pointing to lingering pressure from fading global growth prospects in coming months.

Friday’s data comes at a time when fears of a global recession are feared, as policymakers raise interest rates to curb rising inflation, as consumers and businesses around the world face challenges from the war of Ukraine and supply chain disruptions.

Gross domestic product fell 2.6% in the second quarter compared to the previous one, according to official data, compared to expectations of a 1.5% decline and a revised increase of 1.4% from the previous quarter.

In year-on-year terms, GDP for the April-June quarter grew by a tepid 0.4%, below forecasts for a 1.0% riseaccording to a Reuters poll of analysts, which is a sharp slowdown from 4.8% in the first quarter.

In the first half of the year, GDP grew by 2.5%, well below the Government’s target of growth of close to 5.5% for this year.

“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, or two consecutive quarters of contraction, can be ruled out,” said Toru Nishihama, an economist head of the Tokyo Dai-ichi Life Analysis Institute.

“Given the meager growth, the Chinese government is likely to roll out economic stimulus measures from now on to revive its flagging growth, but the hurdles are high for the Pboc (China’s central bank) to cut interest rates further, as it would fuel inflation, which has remained relatively low so far.

In March and April, total or partial confinements were imposed in the main centers of the countryincluding the commercial capital, Shanghai, which posted a 13.7% year-on-year contraction in GDP last quarter.

While many of those lockdowns have since been lifted, and June data offers signs of improvement, analysts don’t expect a quick economic recovery. China maintains its strict “zero-covid” policy in a context of new outbreaks, the country’s real estate market is in a clear phase of weakening and the global outlook is darkening.

The imposition of new lockdowns in some cities and the arrival of the highly contagious BA.5 variant have increased business and consumer concern over a prolonged period of uncertainty.

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Rising consumer prices in China, while not as strong as elsewhere, may also help limit monetary policy easing.

A Reuters poll predicts that China’s growth will slow to 4.0% in 2022far below the official growth target of around 5.5%.

June activity data, also released on Friday, showed China’s industrial production grew 3.9% in June from a year earlier, accelerating May’s 0.7% rise, though below the increase in 4.1% expected in a Reuters poll.

Retail sales, meanwhile, rose 3.1% from a year earlier in June and marked the strongest growth in four months, after authorities lifted a two-month lockdown in Shanghai. Analysts had expected a 0% rise after May’s 6.7% drop.

“Retail trade growth indicates that lockdowns have been the main drag on consumption, with demand clearly picking up once Shanghai and other major cities emerged from lockdowns at the end of May,” said Jacob Cooke, director General of WPIC Marketing + Technologies, in Beijing.

“Consumers remain somewhat uncertain about the lockdowns, but with signs that future lockdowns will not be as strict, we are optimistic that consumption will continue to recover in the second half.”

Investment in fixed assets grew by 6.1% in the first six months of the year compared to the same period of the previous year, compared to the forecast of an increase of 6.0% and below the jump of 6.2% registered in January-May.

The employment situation remains fragile, with the national survey-based jobless rate falling to 5.5% in June from 5.9% in May, thanks to the recovery in the economy. However, youth unemployment stood at a record level of 19.3% in June, up from 18.4% in May.

The shaky recovery of China’s capital-hungry real estate sector is being jeopardized by a growing number of homebuyers across the country suspending their mortgage payments until developers resume construction on pre-sold homes.

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Property investment fell 9.4% in June, worsening the 7.8% decline recorded in May, while home sales extended their declines by another 18.3% last month, according to Reuters calculations.

“Even massaging the numbers a bit, it’s hard to see how the government’s target of ‘around 5.5%’ growth this year can be met,” analysts at Capital Economics said.

“That would require a huge acceleration in the second half of this year, which is unlikely.”