China Q1 GDP growth steady at 6.4 pct, beats expectations for slowdown

Daniel Fowler
April 19, 2019

"We think we need more evidence to call a full-fledged recovery of the Chinese economy. Our view for the economy is still cautious", Jianwei Xu of Hong Kong-based Natixis said. The country's economy expanded by 6.4 percent in the January to March period, faster than the 6.3 percent projected by economic experts in an AFP survey.

USA stocks were set to open higher, as the futures underlying the S&P 500, Dow and Nasdaq rose between 0.1% and 0.3%.

China's economy grew 6.4% in the first quarter of 2019 according to data released by the National Bureau of Statistics (NBS) on April 17, beating expectations.

First-quarter growth was supported by a sharp jump in industrial production, which surged 8.5 per cent in March from a year earlier, the fastest pace in over four-and-a-half years.

Monthly readings on retail sales, industrial output and fixed asset investment in urban areas all improved from the first two months of the year.

China may be poised to take more stimulus steps to drive an expansion showing renewed signs of health. Long holidays in February likely pushed some production into the following month.

China's per capita disposable income stood at 8,493 yuan in the first three months, up 6.8 percent year on year in real terms, official data showed Wednesday.

"This is just the latest in a string of recent Chinese data that has surprised to the upside, indicating that policy implemented by Beijing at the end of past year could finally be bearing fruit", said Jasper Lawler, head of research at London Capital Group.

All eyes have been on Beijing's infrastructure spending which expanded 4.4 percent in the first three months after plummeting to 3.8 percent growth past year amid a campaign against debt and financial risk.

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The Chinese government is targeting GDP growth of between 6% to 6.5% in 2019. Retail sales expanded 8.7 per cent, while investment was up 6.3 per cent in the year to date.

Sales were led by stronger demand for appliances, furniture and building materials, reflecting a resurgence in the residential property market, a key economic driver.

The growth quickened from an increase of 8.2 percent registered in the first two months. The benchmark Shanghai Composite Stock Index closed at a 13-month high on Wednesday as over three million new investors opened accounts to trade A-shares in March alone, while average new home prices in 70 major Chinese cities accelerated last month.

Auto sales fell 6.9% in March from a year ago, declining for a ninth month.

Consumer spending, factory activity and investment all accelerated in March from the previous month, the National Bureau of Statistics reported.

Local governments will be allowed to issue 2.15 trillion yuan ($321 billion) of special goal bonds in 2019 to fund infrastructure projects, a jump of 59 percent from a year ago.

Analysts do not expect a sharp rebound in China's economy like recoveries in the past, which produced a strong reflationary pulse worldwide, noting its latest stimulus measures have so far been relatively more restrained. In particular, it noted there was further heavy drop in land sales for future development, which could drag on construction and local government revenues later this year.

The central bank has already slashed banks' reserve requirement ratio five times over the past year and is widely expected to ease policy further in coming quarters to spur lending and reduce borrowing costs.

However, the market reaction to the positive data may have been muted by concerns that Chinese policymakers may now decide to temper planned monetary stimulus, Naeem Aslam, chief market analyst at TF Global Markets, warned.

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