China: Economy slows in the second quarter
July 13, 2012
In the second quarter, GDP grew 7.6% over the same period last year, which was below the 8.1% rise observed in the first quarter and represented, in fact, the slowest expansion seen since Q1 2009. Moreover, the reading slightly undershot the 7.8% rise expected by last month's Consensus Forecast. Although the National Bureau of Statistics does not provide a breakdown for GDP by expenditure, additional data suggest that both private consumption and investment continued to moderate in the second quarter. In the first six months, urban fixed-asset investment growth, which includes capital and construction investment, moderated to an accumulated 20.4% in nominal terms (Q1 2012: +20.9% year-on-year). In addition, private consumption likely lost some steam as well, with retail sales adding a nominal 13.9% in the second quarter, which is below the 14.8% rise observed in the previous quarter. Net exports, on the other hand, appear to have increased their contribution to overall growth in the second quarter, as exports accelerated over the previous period, while imports slowed somewhat. GDP from the production side showed a steep slowdown in the industrial sector, which grew only 8.3% in the first half of the year (Q1: +9.1% yoy). On the other hand, services increased 7.7% (Q1: +7.5% yoy) and the primary sector expanded 4.3% (Q1: +3.8% yoy). A quarter-on-quarter analysis, however, does not corroborate the deceleration suggested by annual figures, as GDP rose a seasonally adjusted 1.8% in the second quarter, slightly above the 1.6% expansion recorded in the first. The government has set a growth target of 7.5% for this year. Moreover, the 12th Five-Year Plan, which was approved on 14 March 2011, set a growth target of 7% for the 2011-2015 period.