China - Quarterly GDP growth up as expected, March data disappoint

China Macro: Quarterly GDP growth accelerates as expected

In line with our base case, China’s real GDP growth accelerated in quarterly terms in the first quarter of this year, picking up to 1.6% qoq s.a. (from an upwardly revised 1.2% qoq in Q4-2023). This was slightly above the 1.5% qoq s.a. expected by consensus including us. The upward revisions in previous quarters (Q3 and Q4 2023) resulted in annual GDP growth coming in stronger than expected, at 5.3% yoy (Q4-23: 5.2%). This improving growth momentum over the first quarter comes on the back of policy stimulus: the acceleration of public investment over the quarter was mainly driven by state-led investment. All in all, the latest GDP data raise the likelihood that the 5% growth target for 2024 will be within reach. That said, the macro data for March (see below) show that there are still quite some challenges on the way. We are currently reviewing our growth forecasts and will publish any revisions in our April Global Monthly next week.

Activity data for March disappoint

In contrast to Q1 GDP and the combined January/February data published last month, the activity data for March came in clearly weaker than expected. These data confirm that China’s growth is still unbalanced, and driven by the supply side – with consumption and private investment remaining weak and drags from real estate still significant (see also here). The biggest negative surprise came from retail sales, with annual growth slowing to 3.1% yoy in March (consensus: 4.8%, Jan/Feb: 5.5%). Annual growth of industrial production fell to 4.5% yoy (consensus: 6.0%, Jan/Feb: 7.0%). Meanwhile, fixed investment picked up to 4.5% yoy ytd (consensus: 4.0%, Jan/Feb: 4.2%). This was mainly driven by public investment (+7.8% yoy ytd), on the back of policy stimulus. Private investment turned to positive growth again this year, but at a still weak pace of +0.5 yoy ytd in March. Meanwhile, property investment fell even deeper into contraction territory, to -9.5% yoy ytd (Jan/Feb: -9.0%), confirming that the real estate sector is not out of the woods yet. Residential property sales also remained deeply in contraction territory, at -31% yoy ytd. Meanwhile, the surveyed jobless rate improved slightly to 5.2% (February: 5.3%). All in all, Bloomberg’s monthly GDP estimate pointed to a clear slowdown in March, to 5.6% yoy – down from 7.0% in January/February.