CHINA’S GROSS domestic product (GDP) rose by 7.6 per cent in the second quarter of this year, the slowest rate of expansion in three years, as declining investment in the property market and weak exports weighed on the world’s second largest economy.
The slowdown is in line with analysts’ expectations and marked the sixth consecutive quarter of decline fuelled by Europe’s debt woes and weakness in the US.
China has notched up 10 per cent growth rates for most of the last decade, but expansion has slowed as the government tries to keep tabs on the overheating economy.
“The recovery in Q2 was weaker than we had expected three months ago because policy support has been more muted until recently,” said UBS analyst Wang Tao.
Ms Tao said the bank’s forecast of the growth trajectory for the rest of the year had not changed, but the lower base in Q2 meant the bank would revise down its 2012 GDP forecast from 8.2 per cent to 8 per cent. “While real GDP growth is recovering, corporate earnings are affected by continued slowdown in revenue growth and margin squeeze, and should improve in Q4 2012.”
Charles Dumas at Lombard Street Research has recalculated the average annualised growth rate for the past three quarters at 5 per cent versus the official number of about 7 per cent.
“Profits are being squeezed as prices have been flat to down for much of the past year, while wage inflation of 15 per cent continued into Q1, and energy, metal and interest rates are all sapping margins,” said Mr Dumas. “The inventory-led hard landing of the past three quarters could now morph into weakness of both fixed investment and consumer incomes.”
Other indicators released yesterday bore out the GDP data, with first-half industrial output up 10.5 per cent year-on-year, down from an 11.6 per cent increase seen in the first quarter.
Retail sales increased 14.4 per cent from one year earlier in the first half, slower than the 14.8 per cent growth registered in the first quarter. Fixed-asset investment, one of the main drivers of China’s economy, grew 20.4 per cent year-on-year to 15.07 trillion yuan (€1.93 billion), down 5.2 percentage points from the same period last year.
