China's GDP growth tops forecasts in first quarter; analysts sceptical

China’s gross domestic product growth rose 4.8 per cent in the first quarter from a year prior, the government announced Monday, picking up from a rate of 4 per cent in the October-to-December period, and beating a consensus 4.2 per cent rate among economists surveyed by Bloomberg. 

The overall acceleration in growth came despite a protracted property slump and a series of lockdowns in March that disrupted business operations and depressed consumption.

The better-than-expected economic data prompted questions from analysts who pointed to inconsistencies with alternative statistics that paint a grimmer picture.

“There’s a quite big gap between the real-estate resilience as shown in the data and on-the-ground feeling of the market,” said Jacqueline Rong, deputy chief China economist for China at BNP Paribas.

New-home sales fell 29 per cent by value last month from a year earlier, according to Bloomberg calculations based on figures from China’s National Bureau of Statistics. That compared with a more than 50 per cent decline reported by the 100 largest property developers. 

Nonetheless, “the figures still reflect the severe situation faced by the economy,” she said. “For the market, the trend, rather than the margin, of the downturn may be the most important to watch to some extent.”

“I don’t see any signs for Covid Zero to be loosened in the short term, although some improvements may be made in areas that had seen severe impact on production and people’s livelihood,” she said.

“We believe actual gross domestic product growth could be a lot weaker than the 4.8 per cent official first-quarter data suggest, as the strong activity data of January and February seem inconsistent with some alternative data sources. And in March, the Chinese economy has been clearly tumbling,” Nomura Holdings wrote in a note. 

Output growth of major raw materials such as cement, steel products and crude steel had a “surprisingly broad, albeit marginal” improvement in March, yet the growth of power generation dropped notably, they added.

“Amid expansive lockdowns, logistics disruptions, the downward spiral in the property sector and slowing exports, we expect activity data to tumble in April,” they said. 

The economists see the risk of a contraction in the second quarter rising, and said there are “downside risks” to the bank’s annual GDP growth forecast of 4.3 per cent.

Joblessness climbs

China reported its biggest decline in consumer spending and worst unemployment rate since the early months of the pandemic. Retail sales contracted in March for the first time since 2020, falling 3.5 per cent from a year ago. The surveyed jobless rate climbed to 5.8 per cent, the highest since May 2020.Spending at restaurants plunged more than 16 per cent in March from a year ago, partly due to the higher base of comparison from last year, but also a sign that consumers are either unable or unwilling to spend.