Goldman Sachs Downgrade China GDP Growth Forecast

Goldman Sachs note that “the easing in Covid restrictions and more proactive policy stimulus contributed to the continued growth recovery in June. However, Q2 GDP data surprised to the downside, suggesting a heavier-than-expected toll from the April/May Covid lockdown on China's growth and mechanically leading to a downward revision to our full-year GDP growth forecast to 3.3% Y/Y (from 4.0% previously).”

• “Among June activity data, industrial production growth rose further on a year-on-year basis, led mainly by a significant improvement in automobile and electric equipment production. Retail sales growth rose significantly and beat market expectations, thanks to improving automobile sales and catering sales. Fixed asset investment growth continued to increase in June, led mainly by infrastructure and manufacturing investment, more than offsetting the weakness in property investment. Surveyed unemployment rates declined in June, suggesting labor market pressure has eased modestly."
• "We expect further growth recovery through the remainder of this year, but believe the pace will be much less steep than in spring 2020 and the renewed Covid risk in some cities in July could constrain the pace of services sector recovery to certain degree. We maintain our view that fiscal and credit easing may play a more important role in coming months.”