China Q1 GDP tops forecast, but March weakness raises outlook risks

BEIJING: China’s economy slowed in March as consumption, real estate and exports were hit hard, taking the shine off faster-than-expected first-quarter growth numbers and worsening an outlook already weakened by COVID-19 curbs and the Ukraine war.

The biggest near-term challenge for Beijing is the tough new coronavirus rules at a time of heightened geopolitical risks, which have intensified supply and commodity cost pressures, leaving Chinese authorities walking a tight rope as they try to stimulate growth without endangering price stability.

Gross domestic product (GDP) expanded by 4.8% in the first quarter from a year earlier, data from the National Bureau of Statistics showed on Monday, beating analysts’ expectations for a 4.4% gain and picking up from 4.0% in the fourth quarter.

A surprisingly strong start in the first two months of the year improved the headline figures, with GDP up 1.3% in January-March in quarter-on-quarter terms, compared with expectations for a 0.6% rise and a revised 1.5% gain in the previous quarter.

Analysts say April data will likely be worse, with lockdowns in commercial centre Shanghai and elsewhere dragging on, prompting some to warn of rising recession risks.

“Further impacts from lockdowns are imminent, not only because there has been a delay in the delivery of daily necessities, but also because they add uncertainty to services and factory operations that have already impacted the labour market,” said Iris Pang, Greater China chief economist at ING.

“We may need to revise our GDP forecasts further if fiscal support does not come in time.”

China’s shares fell, likely reacting to the March numbers and a weak outlook - the blue chip CSI300 index was down 0.6%, while the Shanghai Composite Index dropped 0.5%.

Data on March activity showed retail sales contracting the most on an annual basis since April 2020 on widespread COVID curbs across the country. They fell 3.5%, worse than expectations for a 1.6% decrease and an increase of 6.7% in January-February.

The job market is already showing signs of stress in March, a usually robust month for labour market as factories resume hiring after the Lunar New Year holiday.