China’s Growth Forecasts Cut by Economists on Weak Data

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A raft of disappointing economic data from China last week, especially the sluggish recovery in consumption, has prompted economists to cut their estimates for China’s output in 2021.

Oxford Economics, Barclays Plc and Morgan Stanley cut their forecasts after all key indicators in May missed expectations, and now expect full-year growth to be below 9% from levels around 9% or above.

“The downward forecast revision mainly reflects the weaker-than-expected recovery in consumption and consumer-facing services so far this year,” Barclays economists led by Chang Jian wrote in a note Friday. “We think some of the weakness in consumption could be long-lasting, reflecting changing consumer spending habits post-COVID as well as slowing household income, particularly among lower-income groups.”

Slower exports and weak investment momentum amid rising near-term headwinds including a commodity-price surge and macro-prudential tightening are also among the top reasons citied by the economists for the downward revision.

In May, the overall economic recovery in China showed further signs of moderating, with consumers remaining wary amid local coronavirus outbreaks in parts of China.

The median forecast for China’s gross domestic product is that it would grow 8.5% in 2021, according to a Bloomberg survey of economists.

Nevertheless, economists remain positive on China’s growth outlook and expect the recovery to resume shortly after a hiccup in the second quarter, supported by a broader consumption recovery, better global demand for Chinese exports, and accelerated investment growth.

“Growth will pick up in the second half of the year, despite strong headwinds,” Tommy Wu, lead economist at Oxford Economics, wrote in a note. “We expect domestic demand to gain pace beyond the current weakness.”

FirmReport DateNewOld
Oxford EconomicsJune 228.4%8.9%
BarclaysJune 188.4%9.4%
Morgan StanleyJune 168.8%9%

©2021 Bloomberg L.P.

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