Consumers Support Q1 Growth But Uncertainties Weigh On Outlook

The stream of data from China for March was mixed relative to expectations. The data showed a solid bounce back following the reopening of the economy.

• Q1 GDP rose 2.2% q/q to be up 4.5% y/y, the highest annual rate since Q1 2022, after 2.9% y/y in Q4. YTD GDP is also 4.5% higher. It remains below pre-pandemic rates through.Consumption contributed two-thirds of Q1 growth. Increased government infrastructure investment also lifted growth.
• The outlook for activity continues to be uncertain and China’s NBS said that there are considerable uncertainties around external demand and constraints around domestic demand, as indicated by weak inflation. These could weigh on growth going forward. The NBS expects a pickup in Q1 growth but Q3 and Q4 to be slower due to base effects. But with government spending up 6.8% y/y, there should be support from the fiscal side.
• Retail sales were very robust rising 10.6% y/y in March after 3.5%. Services spending also saw a solid recovery. The fall in the unemployment rate to 5.3% from 5.6% should also support consumption going forward.
• IP growth improved to 3.9% y/y in March from 2.4%, but was lower than the 4.4% expected. IP is now up 3% YTD. Fixed asset investment also disappointed as it moderated to 5.1% y/y YTD from 5.5%.
• The property sector saw weak investment but strong sales. Investment fell 5.8% y/y YTD but sales were up 7.1% from 3.5%, signalling a tentative recovery. However, the government reported that revenue from land sales fell 17.1% y/y.

Source: MNI - Market News/Refinitiv