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The GDP China recorded in Q1 exceeded analysts’ expectations to rise 4.8% despite COVID-induced economic contraction affecting employment.
Despite the impact of lockdowns caused by the Covid outbreak, China recorded an impressive Q1 GDP that topped expectations. According to fresh data released by the National Bureau of Statistics, the East Asian country’s GDP for the first quarter climbed 4.8% year-over-year (YoY). This surpassed the given consensus estimate of 4.4% for the same period. In addition, fixed asset investment for the first quarter also grew by 9.3% YoY, topping expectations for 8.5% growth.
There were other noticeable growth improvements for the first quarter across several fronts of the Chinese economy. For instance, investment in manufacturing surged 15.6% YoY, while infrastructure rose by 8.5% for the same period. Also, industrial production in March inched upwards by 5%, which edged out analysis estimates of 4.5%.
Q1 GDP Affected by Underperforming Retail Sales in China
Despite these positive optics, there were some unwelcome performances in employment and retail sales in China. Retail sales in March slumped 3.5% from a year ago. This was more than twice the 1.6% analysts estimated for the same period.
China is currently in the midst of trying to contain its worst Covid outbreak since the pandemic first began back in 2020. Currently, many operations in major cities across the country have been shuttered – save for the essentials. As a result, the Chinese economy has been in a contraction these past several weeks, similar to the situation in 2020. Speaking directly about this predicament, the National Bureau of Statistics said:
“We must be aware that with the domestic and international environment becoming increasingly complicated and uncertain, the economic development is facing significant difficulties and challenges.”
The unemployment rate in China is also on the rise, going from 5.4% in February to 6% in March across 31 major cities. Furthermore, according to official data dating back to 2018, this rise is also the highest.
“This indicates the unemployment problem in the large cities has become more severe than when the Covid Pandemic started in 2020,” offered Zhiwei Zhang, chief economist at Pinpoint Asset Management.
In addition, Zhang also stated that halting operations in China intensified in April after key cities like Shanghai became affected. As he put it:
“The Covid outbreaks only forced Shanghai and some other cities to enter lockdowns in late March and early April. Therefore, the economic slowdown likely worsened in April.”
China currently faces the challenge of providing jobs for a record high number of the country’s graduates. With the pandemic in its third year, the number of higher education graduates this year will presumably hit 10.76 million. This number is several times higher than the 1.67 million graduates recorded from last year.
Unemployment rate for those between the 16 and 24 years old remains at 16%, the highest since August 2020.
As a result of Covid, the unemployment situation in China contrasts with the country’s historical seasonal trend. Usually, the unemployment rate tends to fall in March after rising in the two prior months due to workers changing jobs around the Spring Festival.