China beats growth forecasts but momentum is still weak

China announced faster-than-expected economic growth of 5.3 percent in the first quarter from a year ago – along with mixed March data including new home prices, retail sales, and industrial output that suggest things are set to get tougher in the rest of the year.

The first-quarter GDP came in comfortably above analysts’ expectations of a 4.6 percent increase.

“The strong first-quarter growth figure goes a long way in achieving China’s ‘around 5 percent’ target for the year,” said Harry Murphy Cruise, economist at Moody’s Analytics.

Analysts have described as ambitious the growth target Beijing aims to accomplish with help of fiscal and monetary stimulus measures, noting last year’s growth rate of 5.2 percent was likely flattered by a rebound from a Covid-hit 2022.

That bounce, however, fizzled away under the weight of the property downturn, rising local debt and weak consumer spending.

New home prices in China dropped 2.2 percent in March, falling at their fastest pace in more than eight years.

Chinese authorities have been ramping up measures to prop up the troubled sector, including relaxing home purchase curbs, supporting urban village renovation, and pushing banks to quicken new loan approvals to cash-strapped developers.

Analysts say many of these policies are piecemeal in nature or have only limited short-term impact, which in turn is keeping home buying sentiment in check and curbing a broader full-blown recovery.

Disappointing factory output and retail sales, released alongside the GDP report, also underlined the persistent weakness in domestic demand.

Industrial output in March grew 4.5 percent from a year earlier, compared with a forecast increase of 6 percent and a gain of 7.0 percent for the January-February period.

Growth of retail sales, a gauge of consumption, rose 3.1 percent year-on-year in March, against a forecast increase of 4.6 percent and slowing from a 5.5 percent gain in the January-February period.

Fixed asset investment grew an annual 4.5 percent over the first three months of 2024, versus expectations for a 4.1 percent rise. It expanded 4.2 percent in the January-February period.

“The headline number looks good… but I think the momentum is actually quite weak at the end,” said Alvin Tan, head of Asia currency strategy at RBC Capital Markets in Singapore.

China’s surveyed urban unemployment rate stood at 5.2 percent in the first quarter, down 0.3 percentage points from the same period. Youth unemployment rose.