Chinese Quarterly Growth Data Underwhelms

By Glenn Dyer | More Articles by Glenn Dyer

As expected China’s March quarter economic growth boomed – mostly due to a comparison with the sharp fall in the March quarter of 2020.

Compared to the three months to December 2020, GDP growth actually slowed, not accelerated as many analysts had forecast.

Data released Friday by the country’s National Bureau of Statistics showed GDP surged by a record 18.3% in the three months to March following 6.5% growth in the fourth quarter last year.

The increase was the strongest since 1992 when China started collecting economic data on a serious scale.

It was heavily influenced by comparison with the 6.8% plunge in activity a year earlier.

In fact discounting the quarter on quarter annual comparison, the sequential quarterly comparison showed a clear sign of a slowdown.

On a quarterly basis, growth slowed to 0.6% in January-March from a revised 3.2% in the previous quarter, missing market forecasts for a 1.5% increase.

That was despite sold export data for the month of March and the quarter as a whole, and continuing expansion in both manufacturing and service sector activity (although both are not as strong as seen in the US and even Australia).

For the month of March industrial output grew 14.1% year-on-year, slowing from a 35.1% surge in the January-February period and weaker than market forecasts for a 17.2% on-year rise. Industrial output fell 1.15 in March, 2020.

For the first three months of the year, industrial output jumped by 24.5%. And there was an across-the-board improvement.

Retail sales increased 34.2% year-on-year in March, beating a forecast for a 28.0% gain and stronger than the 33.8% jump seen in the first two months of the year.

That strengthening in demand was backed by continuing solid car sales data.

China’s fixed asset investment jumped 25.6% in the first three months from the same period a year earlier, versus a forecast 25.0% increase, but slowing from the January-February’s rise of 35%.

Economists expect growth to again be strong in the current June quarter but moderate over the back half of 2021 to an annual rate of around 8% to 8.5% – better than the 2.3% growth seen in Covid-whacked 2020.

Unusually, the statistics bureau cautioned in an English-language statement that the spread of Covid-19 globally and the “international landscape is complicated with high uncertainties and instabilities.”

“The foundation for domestic recovery is yet to be consolidated and long-standing structural problems remain prominent with new situations and issues arising from development,” the bureau said.

In an analysis released Friday afternoon, National Australian Bank economists underlined the weakness in the GDP data.

“Although the headline rate of growth for China’s economy in Q1 2021 seems incredibly strong – at 18.3% yoy – quarterly growth data point to a weak start to the year – just 0.6%, which was the weakest increase since Q1 1999 (excluding the COVID-19 downturn),” they wrote.

“Our forecast for 2021 is unchanged at 9.5%. As COVID-19 related distortions wash out, we expect growth to slow below 6% in both 2022 and 2023, as the Chinese economy becomes more reliant on household consumption than industry.”


Glenn Dyer

About Glenn Dyer

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.

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