Q2 Data Shows China Growth Continues To Cool
China’s second quarter economic growth slowed slightly to 6.7% in the second quarter, its slowest pace since 2016, as the impact of an aggressive deleveraging campaign curtailed investment in infrastructure and manufacturing.
That growth rate was still above the government’s target of “about 6.5%” growth for the year. But the slowing down that emerged noticeably in may continued into June, with property investment weakening. GDP had risen by 6.8% over the previous three quarters.
The slowdown comes as China’s trade war with the US intensifies, adding to pressures from slowing domestic demand. There was no sign of any impact in the quarter (exports remained solid), and economists expect any reaction to start showing in the third and 4th quarters.
In response to the signs of a slowdown, the central bank has loosened policy in recent weeks, cutting the level of reserves the country’s banks are required to keep on deposit and committing to maintaining a stable level of liquidity in the financial system to avoid any unnecessary tightenings.
Retail spending in June rose by 9% over a year earlier, a half-percentage point higher than in May. The increase was driven by rapid growth in the sales of higher-end consumer goods such as cosmetics and audio-video equipment.
Investment in factories, housing and other fixed assets rose 6% in the first half of the year over a year earlier, a rate that was 1.5 percentage points slower than the rate in the first quarter. Industrial output slowed to a rate of 6% from 6.8% in may and 7.2% at the start of the year.
Steel mills produced a near record 80.2 million tonnes of crude steel last month, according to the National Bureau of Statistics. That was down 1.1% from May’s record 81.13 million tonnes, but June has one less day.
So according to Reuters figures, daily average production in June hit 2.67 million tonnes, higher than May’s record of 2.62 million tonnes.
For the first half, China’s steel output of 451.16 million tonnes up 6% from 419.75 million tonnes in same period last year. But iron ore imports fell 1.6% to 530.69 million tonnes in the first half of this year from the same period a year ago.
Production of coke, a raw material used in steelmaking, fell 4.7% in June to 36.13 million tonnes compared to the same period last year because of the environmental and safety checks across steel producing regions in June..
For the first half year, coke output fell 3.2% to 212 million tonnes from a year earlier.
China’s property investment posted its weakest growth in six months in June as developers were hit with new restrictions and tighter funding conditions, in a sign one of the economy’s key drivers was sagging.
Growth in real estate investment slowed to 8.4% in June year-on-year, compared with a 9.8% rise in May. Property sales by floor area rose 4.5% in June from a year ago, down from an 8% rate in May.
Reuters said that in a sign of fading confidence among property developers, new construction starts measured by floor area rose 15% in June from a year earlier, slowing from a 20.5% in May.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.