China’s economic data shows the recovery is fading fast

BEIJING, July 16 (Reuters) – A spate of economic data from China on Monday is expected to show a quick exit from its post-pandemic bounce, raising expectations that Beijing will soon unveil more stimulus measures to boost activity and shaky consumer confidence. .

After a strong start following the lifting of strict COVID-19 measures, the latest data points to a sharp loss of economic momentum due to weak demand at home and abroad and a prolonged slump in the country’s property market, traditionally a significant growth. driver.

The world’s second-largest economy, on a seasonally adjusted basis, managed growth of just 0.5% in the second quarter from three months earlier, according to economists polled by Reuters, which are expected to show separate data for June on industrial production, retail sales and investment. Continues to cool.

Some economists have blamed “scarring effects” on years of tougher COVID measures and regulatory restrictions on the property and technology sectors — despite recent official efforts to shift some restrictions to support the economy.

With uncertainty high, cautious households and private businesses are building up their savings and paying down debt rather than making new purchases or investments. Youth unemployment has reached record highs.

On a year-over-year basis, the economist said the April-June gross domestic product (GDP) may have grown 7.3% compared to 4.5% growth in the first quarter.

However, that reading will be heavily skewed by a sharp decline in activity last spring, when parts of the country eased COVID-19 lockdowns.

Data on Thursday showed China’s exports fell the most in three years in June, falling a worse-than-expected 12.4% year-on-year, as cooling global demand added more pressure to the economy.

New home prices were unchanged in June, the weakest result this year, with rises nationwide dampened by continued weakness in the property sector, which accounts for a quarter of economic activity.

Producer prices fell at their slowest pace in seven years in June and consumer prices teetered on the edge of deflation, data showed earlier in the week.

Officials are likely to unveil several stimulus measures, including fiscal spending to finance big-ticket infrastructure projects, more support for consumers and private firms and some easing of asset policy, policymakers and economists said. But analysts say a quick turnaround is unlikely.

China’s central bank will use policy tools such as the reserve requirement ratio (RRR) and the medium-term lending facility to address the challenges, a senior bank official said on Friday.

Analysts polled by Reuters expect the central bank to cut the banks’ reserve requirement ratio (RRR) by 25 basis points in the third quarter, while freeing up additional funds for lending, while keeping fixed lending rates steady.

The central bank cut the RRR—the amount banks are required to hold as reserves—in March.

China also cut its key lending rates by 10 basis points in June, the first cut in 10 months.

But the central bank remains cautious about cutting lending rates further. A reluctance to borrow among private firms and households and continued policy easing will hurt banks already facing margin pressures, analysts said.

The easing of the policy could trigger more capital outflows from China’s struggling financial markets and pressure the yuan currency, which recently hit an eight-month low.

Reporting by Kevin Yao; Editing by Kim Coghill

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