China’s economic growth collapsed to just 4.7{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} YoY in the second quarter, missing all but one economist’s forecast, as the world’s second largest economy is slowly but surely grinding to a halt (absent a bazooka stimulus).
GDP, which rose 5.3{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} in the first quarter, had been expected to rise 5.1{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} based on economists polled by Bloomberg; instead growth slumped to just 4.7{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38}, the lowest growth since March 2023.
In sequential terms, GDP fell to 0.7{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} QoQ in Q2 from 1.5{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} in Q1. Industrial production growth remained solid at +5.3{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} yoy in June, despite a moderation from +5.6{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} yoy in May, thanks to strong export growth.
China has grappled with weak consumer demand and a prolonged property slowdown, prompting greater intervention from policymakers in recent months, but in the absence of a bazooka stimulus – both fiscal and monetary – it is unlikely that anything will change and growth will continue to cool quarter after quarter, until there is a brutal recession and/or civil unrest.
Elsewhere, industrial production rose 5.3{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} in June, slightly above expectations of 5.0{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} but below the 5.6{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} increase in Q1, while retail sales rose just 2.0{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} missing expectations of 3.4{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} by a wide margin and in line with sluggish tourism revenue growth during the Dragon Boat Festival and the soft 618 Online Shopping Festival. Fixed Investment rose 3.9{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38}, right on top of reduced expectations, and reflecting the tug-of-war between policy support, adverse weather conditions and still-depressed property investment.
Separately, new home prices in China fell 4.9{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} year on year last month, the fastest pace of decline in nine years, according to Bloomberg calculations, while new construction starts and property investment were down 23.7{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38} and 10.1{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38}, respectively, in the first half of the year.
According to Goldman, taking Q2 GDP and June activity data together, “domestic demand remained sluggish despite strong exports, and more policy easing is necessary through the remainder of this year, especially on the fiscal and housing fronts.”
The data release came as the Chinese Communist party’s Central Committee on Monday launched its third plenum, a four-day meeting in which the country’s leadership is expected to set the direction of economic policy. The last such event was held in 2018.
Beijing has set a full-year economic growth target of about 5{3da602ca2e5ba97d747a870ebcce8c95d74f6ad8c291505a4dfd45401c18df38}, and unless Beijing launches a bazooka stimulus, it has precisely zero chance of hitting it.
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