China’s economy remains buoyant according to first quarter growth figures released yesterday, but there were still signs of a slowing in the pace of activity.
A surge in industrial activity pushed China’s annual economic growth rate (GDP) to an annual 6.9% rate in the three months to March, topping market forecasts of 6.8% and well ahead of the government’s estimate for 2017 as a whole of 6.5%.
That was well ahead of the 6.7% for 2016 as a whole. Quarter on quarter, GDP growth slowed in January-March to 1.3% from the 1.7% rate in the three months to December.
Analysts had expected quarterly growth would ease to 1.6%, so on that basis there was a noticeable slowing in the pace of activity in the three months to March, despite higher production figures for steel, electricity and rail freight.
Industrial production for March rose 7.6% compared with the same month last year, well ahead of forecasts of 6.3%, while retail sales for the month jumped 10.9%) well ahead of the 9.5% a year ago and ahead of the 9.6% forecast.
And fixed asset investment in the first quarter expanded 9.2%, easily topping forecasts of 8.8% and 8.9% previously.
First-quarter growth was in fact the fastest since the third quarter of 2015, with March data showing investment, retail sales, factory output and exports all grew faster than expected.
Real estate investment growth accelerated to 9.1% in the first quarter from a year earlier, as the pace of new construction starts quickened despite growing attempts by local and provincial governments to cool demand.
That higher property investment saw steel output hit the highest level on record, adding to evidence of a global manufacturing revival that is buoying prices of industrial materials from iron ore to coking coal.
Figures from the National Bureau of Statistics showed that China’s steel output rose 1.8% in March to a monthly record of 72 million tonnes, beating the previous high set in March 2016 of 70.65 million tonnes.
In the first quarter, production totalled 201.1 million tonnes, up 4.6% from the same period a year earlier, and another all time high.
Reuters pointed out that Chinese steel mills have been lifting up output in a bid to profit from rising commodities prices (and domestic steel prices) even as the central government enacts measures to curtail surplus steelmaking (and coal mining) capacity.
China’s banks extended the third highest loans on record in the first quarter, though lending last month was lower than expected.
At the same time, China’s central bank has shifted to a tightening bias, and is using more targeted measures to contain risks in the financial system, after years of ultra-loose settings.
It has raised short-term interest rates several times already this year, and further modest hikes are expected as it tries to coax debt-laden firms to reduce leverage.
And while real estate investment rose 9.1%, that was down from the 10% rate in the final three months of 2016.
Growth accelerated sharply in March as investment growth had grown 8.9% in jJanuary and February, according to China’s National Bureau of Statistics on Monday.
New construction starts measured by floor area were up 11.6% in the first three months of the year, comparing with a 10.4% rise in first two months.
Property sales measured by floor area grew 19.5% in January-March from the same period a year earlier, but that was down sharply from the 25.1% growth in January and February.
Price data from China’s 70 biggest cities will be released later today.
