GDP increased 7.9% in the April-to-June quarter compared with the same period a year ago, China’s National Bureau of Statistics said Thursday.
That rate of growth was significantly slower than the 18.3% year-on-year increase China registered in the first quarter — though that record-breaking figure largely reflected how much the economy slumped in early 2020, as the coronavirus pandemic was taking hold.
The second-quarter rate of growth was a bit weaker than expected. Analysts polled by Reuters predicted that China’s economy would expand 8.1%.
The Chinese economy has flashed some troubling signs in recent months. Record commodity prices drove factory inflation to the highest levels in more than a decade, while supply chain disruptions caused by shipping backlogs and an energy shortage held back factory production.
Growth in the services sector has also slowed recently, as a Covid-19 outbreak in southern China and subsequent containment measures curbed consumer and business activity.
Even as the recovery for the world’s second largest economy is losing steam, China is still on track to exceed its annual growth target this year of more than 6%.
Thursday’s data showed retail sales jumped 12% in June from a year ago, while industrial production increased 8.3%.
Concerns for weaker growth grew last week, after the People’s Bank of China reduced the amount of cash financial institutions must keep in reserve. The move to reduce the reserve requirement ratio by 50 basis points surprised observers, who felt it was a sign that the economic recovery may be faltering.
The first cut to that ratio since April 2020 was intended to encourage banks to lend more, as small business are facing difficulties because of the surging commodity prices, the central bank said.
Even so, China unveiled some good news on trade earlier this week. Exports surged more than 30% in June compared with the same period in 2019, according to customs data.
The strong exports data has helped ease market concerns over “an imminent growth slowdown,” according to Ting Lu, chief China economist for Nomura.
But Lu said the rebound may be “short-lived,” as it was partly driven by the release of pent-up demand to clear backlogs at some major South China ports.
Before Thursday, Lu had predicted China’s GDP to grow 8.1% in the second quarter, before slowing to 6.4% and 5.3%, respectively, in the following two quarters.