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China’s Q2 GDP missed estimates

China’s GDP grew at a rate of 0.4% in the second quarter of the year, significantly lower than estimates as the world’s second largest economy tries to recover its pace in the face of the restrictive measures of the pandemic.

Analysts polled by Reuters had expected China’s economy to grow 1 percent in the second quarter.

At the same time, the country’s industrial production in June also missed expectations, showing a rise of 3.9% compared to the previous year, against the forecast for 4.1%.

However, retail sales in June rose 3.1%, recovering from the previous slump and beating estimates that expected it to be unchanged from last year.

A key boost to retail sales was an increase in spending in several categories, including autos, cosmetics and pharmaceuticals. In contrast, catering, furniture and construction materials recorded a decline.

It is noted that online sales of physical goods rose 8.3% compared to a year ago, significantly lower than the previous month’s 14% increase.

Fixed asset investment for the first half of the year beat expectations, rising 6.1% versus a forecast of 6%.

Total investment in fixed assets also increased on a monthly basis, by 0.95% in June from May. Although investment in infrastructure and manufacturing maintained a similar or better pace of growth from May to June, the pace in real estate slowed.

Specifically, investments in real estate in the first half of the year shrank by 5.4% compared to last year, worse than the 4% drop they had seen in the first five months of the year.

Unemployment in China’s 31 biggest cities fell from pre-pandemic highs to 5.8 percent in June, but among 16- to 24-year-olds it rose further to 19.3 percent.

The country’s statistics office described the latest economic results as “hard-earned achievements” but warned of the “prolonged” impact of Covid-19 and “shrinking demand” at home.

He also noted the growing “risk of stagflation in the global economy” and the tightening of monetary policy abroad.

Agency spokesman Fu Linghui said economic indicators in the second quarter broke their downward trend. He described the impact of Covid as “short-term” and highlighted how China’s inflation is much lower than that in the US and Europe. He added that there are “challenges” to meeting financial targets for the full year.

Source: Capital

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