BEIJING, July 16 (Reuters) – A flurry of Chinese economic data released on Monday is expected to show the post-pandemic recovery is rapidly fading, as the government warns against activity and faltering consumer confidence. Expectations are high that more stimulus will need to be announced soon to boost sentiment.
Despite a strong start to the year following the lifting of stringent COVID-19 measures, recent data point to sluggish domestic and international demand and a long-term outlook for the country’s traditionally strong real estate market. It has been pointed out that the economic momentum has been lost sharply due to the slump. driver.
Economists polled by Reuters said second-quarter seasonally adjusted growth in the world’s second-largest economy is likely to be just 0.5% from three months ago, with June industrial production and retail growth likely to slow. Sales and investments continue to cool, which is expected to be shown in separate data.
Some economists say that despite recent government efforts to roll back some regulations to help the economy, years of draconian COVID-19 measures and regulatory restraints on the property and technology sectors have stoked growth. blaming the “scar effect”
As uncertainty rises, cautious households and private firms are saving more and paying down debt rather than making new purchases or investments. Youth unemployment hit a record high.
Gross domestic product (GDP) could have grown 7.3% in the April-June quarter compared to the same period last year, up 4.5% in the first quarter, economists said.
But that outlook will be greatly distorted by a sharp downturn in activity last spring, when parts of the country were paralyzed by COVID-19 lockdowns.
Thursday’s data showed China’s exports fell a weaker-than-expected 12.4% year-on-year in June, the biggest drop in three years, as weaker global demand added stress to the economy.
New home prices were flat in June, the lowest result of the year, but gains slowed across the country as the real estate sector, which accounts for a quarter of economic activity, remained weak.
Data earlier this week showed producer prices fell at the fastest pace in more than seven years in June and consumer prices teetered on the brink of deflation.
Policymakers and economists said the authorities could come up with more stimulus measures, including fiscal stimulus to finance big infrastructure projects, more support for consumers and private businesses, and some easing of property policies. It is said to be highly sexual. But analysts say a quick turnaround is unlikely.
The People’s Bank of China will use policy tools such as reserve requirement ratios (RRRs) and medium-term lending facilities to weather the challenge, a senior bank official said on Friday.
Analysts polled by Reuters expect the central bank to cut banks’ reserve requirement ratios (RRR) by 25 basis points in the third quarter, allowing more money to be used for lending while stabilizing benchmark lending rates. ing.
The central bank cut the RRR (the amount of cash banks must hold in reserves) in March.
China also lowered its benchmark lending rate by 10 basis points (bp) in June, the first such cut in 10 months.
But the central bank is likely to be wary of further cuts in lending rates. Analysts said the reluctance of private firms and households to borrow means continued policy easing could hurt banks already battling margin pressures.
Aggressive monetary easing could also trigger further capital outflows from China’s faltering financial markets, weighing on the yuan, which has fallen to an eight-month low.
Reported by Kevin Yao.Editing: Kim Coghill
Our criteria: Thomson Reuters Trust Principles.