China’s economic output surprised on the upside in the first three months of 2022, logging 4.8% growth year-on-year, well above analyst expectations.
On the one hand March activity slowed sharply as draconian Covid-19 lockdowns dramatically impeded activity, with the malaise in services showing signs of creeping into manufacturing. On the other, total social financing, the country’s broadest measure of credit, hit 4.7 trillion yuan ($730 billion) in March where economists had expected 3.7 trillion.
This is certainly the calm before the statistical storm. Gavekal researchers estimate cities comprising over half of GDP came under some form of restrictions by early April.
Endless limits on movement could set off a recession , yet while the People’s Bank of China announced another cut to bank reserve requirements on Friday, it made no move on interest rates. Investors who have bet on drastic easing are a disappointed lot.
The benchmark CSI300 equity index fell on the GDP report, probably because this rosier-than-expected print will help the PBOC justify its rate conservatism for a little while longer.
