China’s GDP grew 7.9% in the second quarter; retail sales beat expectations

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A McDonald’s delivery worker walks past pig statues outside an art museum in Beijing on July 10, 2021.

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BEIJING — China reported second-quarter GDP growth that came in slightly below expectations, while retail sales and industrial production grew faster than forecast in June.

The country’s gross domestic product increased 7.9% in the second quarter from a year ago, the National Bureau of Statistics said Thursday. That fell short of Reuters’ estimate of 8.1% growth for the April to June period.

“Overall, China’s economy looks to be on track for recovery, with the 6% annual growth goal in reach,” Chaoping Zhu, global market strategist at JPMorgan Asset Management, said in a note.

“However, downside and structural risks in domestic demand are concerning,” he said, pointing to weak growth in long-term credit and uncertainty over market regulation.

Second-quarter GDP rose 1.3% from the first quarter, faster than the 0.6% pace between the first quarter of this year and fourth quarter of 2020. However, the latest quarterly increase was still slower than the 2.6% pace of the fourth quarter.

In the first quarter, GDP grew 18.3%, up from a contraction a year ago.

“China’s economy sustained a steady recovery,” the statistics bureau said in a release. But the bureau added there were still concerns about the global spread of the pandemic and “unbalanced” recovery domestically.

Retail sales rose 12.1% in June from a year ago, more than the expected 11% level forecast by Reuters. The fastest-growing category was beverages, up 29.1% year-on-year.

Retail sales growth has lagged that of the overall economy, and missed analysts’ expectations for the first two months of the second quarter.

Consumption declined year-on-year in May for four provincial capitals — Wuhan, Guiyang, Shijiazhuang and Yinchuan — according to analysis of public data by Pinpoint Asset Management.

Industrial production grew by 8.3%, greater than the 7.8% Reuters estimate.

In the last three months, Chinese authorities have also announced support for companies affected by the surge in commodity prices.

The urban survey unemployment rate held steady at 5% in June, while unemployment for the younger 16 to 24 age category climbed to 15.4% — the same as June 2020.

On Thursday, a cut to the reserve requirement ratio (RRR), or the amount of funds banks must hold in reserve, was set to take effect. Authorities’ initial hint of such a cut surprised investors last week, and signaled concerns of slower growth.

The cut is expected to release about 1 trillion yuan (or $154 billion) into the economy.

Meanwhile, China’s customs agency said earlier this week that exports rose a more-than-expected 32.2% in June.

Exports growth will likely slow in the second half of the year, said Bruce Pang, head of macro and strategy research at China Renaissance. He cited factors such as a high level of growth in the second half of last year and weaker growth in commodity prices.

China’s slower pace of economic recovery “is still clouded with uncertainties and unbalanced growth, as employment, household income, consumption, manufacturing investment, the service sector and private companies have yet to return to pre-pandemic levels,” Pang said.

— CNBC’s Yen Nee Lee contributed to this report.

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