Slowing down after strong Q1
China’s economy posted a strong performance in Q1 helped by retail sales, urban investment, and industrial output. April numbers and predictions for the rest of the year do point to a slow down for the world’s second largest economy.
Urban investment shows year over year growth however 3.3% reduction from month before. Biggest miss came from industrial output which lagged previous month by as much as 12%, coming in at 6.5%-lower than the forecast. Retail sales was the only bright spot which came in at 10.7% beating the forecast however shows a decline against the previous month at 10.9%.
Analysts also point to the 7 month low PMI (Purchasing Managers Index) which registered 50.3, slowest pace growth as a major indicator that China’s economy is headed for a slow down through the rest of 2017. Total new orders rose at the slowest rate since fall of 2016. Lower commodity prices, iron ore, steel and other raw materials led to reduction in producer price inflation.
China’s economy posted a strong 6.9% GDP growth in Q1, economists and analysts are projecting 6.5% GDP growth in 2017 which predicts slower growth in remaining quarters.
Infrastructure and real estate investment drove the economic growth in the first quarter of 2017. Real estate investments posted a strong 9.1 percent growth year-over-year. Growth in the service sector was weaker. “Faster growth in industrial output is the primary factor in the first quarter surprise, and due mostly to higher value-added growth related to supply-side consolidation in heavy industry,” said Brian Jackson, China economist at IHS Global Insight.
Financial experts and analysts agree that ballooning real estate prices represent the single biggest risk to the China’s economic growth through 2020.
Steel inventories rose in Q1 which indicates that production exceeded demand which may lead to sluggish growth in the later part of the year.
Disposable income rose sharply to 7 percent, fastest since year 2015.
Economists and annalists agree that China’s economy will slow down gradually vs a sharp decline.
The author, KetanDeshpande, lives in Minnesota and writes about a variety of topics in his blog such as global economy, market and industry trends, successful strategies for businesses, and others. Leveraging his global strategic leadership experience from the manufacturing industry to offer insights in to how businesses can meet the sustainable growth and profitability goals.
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