China: GDP still seen expanding 1.8% in 2020 – UOB

Economist at UOB Group Ho Woei Chen, CFA, reviewed the latest set of data releases in the Chinese economy.

Key Quotes

“The activity indicators for May showed further improvement in industrial production (IP) growth to 4.4% y/y in May…bringing the year-to-date IP to -2.8% y/y. The contraction in fixed-asset investment (FAI) narrowed to -6.3% y/y YD.... However, retail sales had continued to lag the recovery in the industrial sector, as it continued to fall at -2.8% y/y in May…”

“Meanwhile, the survey jobless rate improved to 5.9% in May from 6.0% in the previous month after touching a high of 6.2% in February… Stability in employment remains one of the key policy priorities in China and policymakers will continue to use a mix of policy tools to maintain the unemployment rate close to the official target of 6.0%.”

“In general, the latest data were slightly below Bloomberg’s consensus forecasts and pointed to a fairly lacklustre recovery pace in China. Earlier release of the trade data also showed China’s exports (in USD-terms) slipping back to contraction of -3.3% y/y in May from a gain of +3.5% y/y in April, though this was partly due to a higher base of comparison.”

“We are maintaining our forecast for China’s GDP growth at 3.5% y/y in 2Q20 before a more broad-based recovery in the second half as more economies emerge from their COVID-19 lockdowns. Our current GDP outlook for China is at 4.9% y/y in 3Q20 and 5.7% y/y in 4Q20 for full-year growth of 1.8% (2019: 6.1%).”