Financial News: China GDP Growth Tops Expectations

China GDP Growth Tops Expectations

(RTTNews) - China's economy grew more than expected in the first quarter but the war in the Middle East darkens prospects due to supply side shocks and its heavy reliance on energy imports.

Gross domestic product expanded 5.0 percent on a yearly basis in the first quarter, the National Bureau of Statistics reported Thursday. The annual growth exceeded the prior quarter's 4.5 percent expansion and also economists' forecast of 4.8 percent.

The economy remains on track to achieve government's 4.5 percent to 5 percent target this year.

On a quarterly basis, GDP gained 1.3 percent but slightly weaker than the expected expansion of 1.4 percent.

Industrial production growth eased to 5.7 percent in March from 6.3 percent in January and February. The rate also remained below forecast of 5.4 percent.

Similarly, retail sales grew at a slower pace of 1.7 percent year-on-year in March, compared to January to February period's 2.8 percent expansion. Economists had anticipated a 2.4 percent rise.

In the first quarter, fixed asset investment posted an expansion of 1.7 percent after rising 1.8 percent in the January to February period. Property investment declined 11.2 percent.

The urban unemployment rate rose unexpectedly to 5.4 percent in March from 5.3 percent in February. The rate was forecast to ease to 5.2 percent.

Earlier this week, the International Monetary Fund downgraded China's economic growth forecast for this year to 4.4 percent from 4.5 percent. The projection for next year was retained at 4.0 percent. In the World Economic Outlook, the IMF lowered its global growth outlook for this year to 3.1 percent from 3.3 percent, citing the war in the Middle East. Growth was projected at 3.2 percent in 2027, unchanged from the previous projection.

ING economist Lynn Song said strong tertiary industry growth and solid industrial activity helped to offset sluggish consumption and investment and a drop in the first-quarter trade surplus, but higher energy prices could begin to drag on growth in the months ahead.

The above forecast growth in the first quarter gives policymakers some buffer to work with and potentially reduce the urgency to ramp up more aggressive stimulus, the economist observed.

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