Reuters - China's economy grew slightly more slowly than expected in the second quarter, weighed down by higher raw material costs and new Covid-19 outbreaks, as expectations build that politicians and bureaucrats may have to do more to support the recovery.
Gross domestic product expanded 7.9% in the April-June quarter from a year earlier, official data showed Thursday, missing expectations for a rise of 8.1% in a Reuters poll of economists.
Growth slowed significantly from a record 18.3% expansion in the January-March period, when the year-on-year growth rate was heavily skewed by the Covid-induced slump in the first quarter of 2020.
Average second quarter growth in 2020 and 2021 was 5.5%, compared to a 5% average for the first quarter, according to the NBS.
June activity data slowed from the month before but beat expectations.
"The numbers were marginally below our expectation and the market's expectation (but) I think the momentum is fairly strong," UOB economist Woei Chen Ho in Singapore said.
"Our greater concern is the uneven recovery that we've seen so far and for China the recovery in domestic consumption is very important...retail sales this month was fairly strong and that may allay some concerns."
While the world's second-largest economy has rebounded strongly from the virus crisis, buoyed by solid export demand and policy support, data releases in recent months have suggested some loss in momentum.
Higher raw material costs, supply shortages and pollution controls are weighing on industrial activity, while small virus outbreaks have kept a lid on consumer spending.
Market participants are watching to see if the central bank is shifting to an easier policy stance after the People's Bank of China announced last week it would cut the amount of cash that banks must hold as reserves, just as some other central banks begin or start thinking about exiting pandemic-era stimulus.
On a quarterly basis, gross domestic product expanded 1.3% in the April-June period, the National Bureau of Statistics said, just beating expectations for a 1.2% rise in the Reuters poll. The bureau revised down growth in the first quarter from the fourth quarter last year to 0.4%.
The PBOC move, which released about 1 trillion yuan ($154.64 billion) in long-term liquidity to bolster the recovery, comes even as politicians and bureaucrats have sought to normalize policy after the economy's strong rebound from the coronavirus crisis to contain financial risks.
It highlights the challenges policymakers will face in rolling back pandemic-era stimulus as the coronavirus continues to flare-up around the world.
"The domestic economic recovery is uneven," Liu Aihua, a bureau official said at a briefing Thursday.
"We must also see that the global epidemic continues to evolve, and there are many external instabilities and uncertain factors," she said.
Economists in the Reuters poll expected more support this year, forecasting a further cut in the bank reserve requirement ratio in the fourth quarter.
"Based on the current situation, if policymakers do not act, the gross domestic product figure in the fourth quarter could fall out of the reasonable range as data from last fourth quarter was shining," Xing Zhaopeng, a senior China strategist at ANZ in Shanghai, said.
"I expect the government to roll out targeted easing measures."
China's strong exports have been a key support to the country's post-Covid recovery, but a customs official said this week overall trade growth may slow in the second half of 2021, partly reflecting Covid-19 pandemic uncertainties.
"Headwinds to growth are likely to intensify during the second half of the year," said Julian Evans-Pritchard of Capital Economics in a note.
"China's Covid-19 export boom appears to have peaked and will unwind over the coming quarters as vaccine rollouts and reopening help to normalize global consumption patterns."
The bureau data showed China's industrial output grew 8.3% in June from a year ago, slowing from a 8.8% rise in May. Economists in the poll had expected a 7.8% year-on-year rise.
Retail sales grew 12.1% from a year earlier in June. Analysts in the poll had expected a 11.0% increase after May's 12.4% rise.
Economists in the Reuters poll expected an 8.6% gross domestic product expansion in 2021, which would be the highest annual growth in a decade and well above the country's official target for growth higher than 6%. China was the only significant economy to have avoided a contraction last year, expanding 2.3%.
Fixed asset investment grew 12.6% in the first six months from the same period a year earlier, versus a forecast 12.1% uptick and down from a 15.4% jump in January-May.