China: Growth beat overshadowed by weak demand – TD Securities

TD Securities strategists highlight that China’s Q1 Gross Domestic Product (GDP) reached 5.0% year-on-year, at the top of the official target range, driven by strong exports and early bond quota usage. However, they underline soft retail sales, property-related weakness, higher unemployment and slowing export growth, suggesting current activity concerns overshadow the solid headline, with implications for the Yuan outlook.

Solid GDP contrasts with fragile demand

"Q1 GDP came in at 5.0% y/y (mkt 4.8%, prior 4.5%), the fastest pace in three quarters and at the top end of the 4.5% to 5% target range. Strong exports, +14.7% y/y in dollar terms over Q1 and the early release of the bond quota helped drive the headline beat."

"Industrial output rose 5.7% y/y (mkt 5.3%) on AI-related manufacturing however retail sales fell short of the mark, +1.7% y/y (mkt 2.4%). Clearly demand is an issue, especially in the property sector, with construction materials -9% y/y and furniture -8.7% y/y."

"Not helping matters is the survey jobless rate hitting the highest in a year at 5.4% (mkt 5.2%). With data released earlier this week showing export growth decelerating sharply from 22% in Jan/Feb to 2.5% y/y in Mar, a sign that the Middle East war is weighing on external demand, and signs the consumer is weak, it appears as though current activity is overshadowing the solid Q1 outcome."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)