China’s economy grew at just a 0.4% rate in the June quarter. Thanks to a Pandemic lockdown that covered 350 million people, China’s GDP grew at the second lowest rate ever recorded. Shanghai’s economy, for example, contracted by 13.7% in the second quarter from a year earlier as a result of a long Pandemic lockdown in that city.
The numbers mean that China will miss its GDP growth target of 5.5% a year by a big margin. Goldman Sachs cut its forecast to 3.3% growth for the year. Growth in the first six months of the year was just 2.5%.
The slow growth in China isn’t good news for the global economy and is especially negative for commodity-producing countries and companies.
I don’t see anything in today’s numbers pointing to a fast improvement either. The slump in China’s property investment continued. And this week there have been reports that households in dozens of cities have stopped paying mortgages due to property developers’ failure to complete the construction of their homes.
And the official data looks suspiciously positive. Before the official data release, several indicators had pointed to economic activity actually shrinking in the quarter. Travel data showed passenger trips taken on China’s roads were mostly below last year’s levels into July, while car purchases, which make up about 10% of monthly retail sales, fell more than 10% in the quarter. The service sector–which accounts for more than half of the economy–contracted 0.4% in the second quarter compared with a year ago. The youth unemployment rate climbed to a new record of 19.3% in June, even though the overall employment rate improved slightly as cities eased lockdowns.
