Chinese Q1 GDP growth beats forecasts
By Alexander Bueso
Date: Tuesday 18 Apr 2023
(Sharecast News) - Economic activity in the People's Republic of China accelerated by more than expected at the start of 2023, leading some economists to bump up their forecasts for full-year growth.
According to the National Bureau of Statistics, over the first quarter, gross domestic product expacted at a 4.5% year-on-year pace Bloomberg: 4.0%).
In terms of quarterly rates of expansion, GDP moved ahead at a clip of 2.2%, up from 0.6% over the last three months of the previous year.
And according to Julian Evans-Pritchard, head of China economics at Capital Economics, GDP was headed towards growth of over 7.0% during the second quarter.
GDP growth during the third quarter was led by services, where output jumped by 5.4% on the year.
Seperate monthly figures for March, that were also released on Tuesday, revealed an annual rate of growth in retail sales of 10.6% (Bloomberg: 7.5%) for the month of March.
"This was partly due to favourable base effects from a year ago when several large cities entered lockdowns, Evans-Pritchard said.
"But our estimates suggest sales continued to rise in seasonally adjusted terms too."
Industrial output was up by 3.9% on the year, against growth or 2.4% during the prior quarter (Bloomberg: 4.4%).
Iris Pang at ING said weaker demand in the US and Europe accounted for the modest rate of growth of industrial production and noted the contraction seen in most electronics production as a result of the US export bans.
On the other hand, fixed asset investment rose by 5.1% in March (Bloomberg: 5.7%), which implied a slowdown in the year-on-year pace of growth from the month.
"Admittedly, industry appears to have lost some momentum this month. But the signals on services remain positive," Evans-Pritchard said.
"Our mobility tracker reached a new high in recent days, while consumer confidence has strengthened further according to an IPSOS survey published last week."
Evans-Pritchard said Chinese GDP growth might hit 6% in 2023.
"And in practice, growth is likely to be even higher given that the official GDP figures understated the extent of last year's downturn."
For her part, Pang said the data showed there was no immediate need for massive stimulus from the government and that the yuan should strengthen to 6.5 against the Greenback by the end of 2023.
Nonetheless, Pang believed that Beijing would stick to its plans for infrastructure investment given the expected deterioration overseas.
Duncan Wrigley, chief China+ economist at Pantheon Macroeconomics agreed that authorities would stick to their current policy settings, albeit while monitoring the longevity of the recovery in the private sector.
He also said that policymakers had "much to cheer about" in the first quarter economic data.
Yet among the things that might worry Beijing were private sector investment, which grew by 0.6% year-on-year in Q1, against growth of 10.0% at state-owned enterprises.
Another potential source of concern was that March's sharp rise in exports was expected to fade in the back half of 2023, due to a slowing global economy.
Nonetheless, he mused out loud that: "The biggest question is whether the current consumption rebound has sufficient stamina to power the economy through the rest of the year.
"We see the current consumption bounce as reflecting the release of pent-up demand and spending by well-off urban households with secure jobs.
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