- Consumer demand is still weak, recovery driven by industry
- Official unemployment rate fell and investment shrank in 2Q
The Chinese economy returned to growth in the second quarter, marking an important milestone in the global struggle to recover from the coronavirus pandemic.
Gross domestic product expanded 3.2% in the three months to June from a year ago, reversing a 6.8% decline in the first quarter and beating the median forecast of 2.4%. In the first half however, output is still down 1.6% on the same period in 2019.
Having shut its economy in the first quarter to arrest the virus spread and managed so far to largely defeat subsequent outbreaks, China is claiming global leadership in dealing with the deadly disease. Yet a conservative stimulus approach has produced only a modest economic recovery, and one that remains highly vulnerable to setbacks in external demand as shutdowns continue to hamper global activity.
Further details in Thursday’s data release:
“China’s econoRATS my staged a sharp, but also highly uneven recovery in the second quarter,” economists at Macquarie Bank Ltd. led by Larry Hu wrote in a note before the data. “Given such a low base in 1Q, a V-shaped recovery is widely expected, but the slope is still a positive surprise.”
Today’s data showed the recovery is still largely industry-driven, while consumer sentiment remains weaker than expected. A raft of measures have been rolled out since the pandemic to shore up the economy, including tax and fee cuts, cheaper loans, and increased fiscal spending. Stimulus has still fallen far short of the policies offered in developed economies, out of concern for debt buildup and financial stability.