Economic growth in China slowed sharply in the last quarter – with economic growth down 0.4% from a year ago, the government said – as the country’s “zero COVID” policy boosted closures in major cities that lasted much of the three-month period.
why is it important: Aggressive efforts to eradicate COVID-19 infections have boosted industrial production and consumer spending in the world’s second-largest economy.
- China’s economy managed to avoid a contraction thanks to the measure, according to its government data – but recorded the slowest pace of growth since the start of 2020, when COVID first spread through the country.
- For context, China’s economy grew 4.8% in the first quarter from a year earlier.
- By a different measure, the economy contracted 2.6% quarter over quarter in the April-June period.
The big picture: The blockages in China have been felt around the world, as delayed shipments of goods to other countries have compounded supply chain problems that have driven inflation higher.
- More recent economic data – also released by the country’s government on Thursday – points to an upturn in economic activity: in June, retail sales increased by 3.1% (compared to a contraction of 7% in May) while restrictions in major cities like Beijing and Shanghai have eased.
- Thirty one cities remain under full or partial lockdown, accounting for more than 17% of the country’s economic activity, according to investment bank Nomura’s tally this week.
The bottom line: It was clear that China’s economy would take a hit as the mainland’s worst COVID-19 outbreak to date forced strict lockdowns.
- Although analysts have long treated government-released economic growth figures with suspicion, the data is a broad indicator of slowing growth.
Go further: China’s COVID lockdowns weigh heavily on economy