(Bloomberg) -- China’s economy slowed largely in line with economists forecasts in the second quarter, with the recovery showing signs of steadying as consumption accelerated in June.
Gross domestic product expanded 7.9% from a year earlier, the National Bureau of Statistics said Thursday, down from 18.3% in the previous quarter and compared with a median forecast of 8% in a Bloomberg survey of economists. On a two-year average growth basis, which strips out the effect of last year’s pandemic, the economy grew 5.5% last quarter, up from 5% in the previous three months.
The recovery has shown signs of plateauing in recent months after a sharp V-shaped rebound driven by industrial output and exports. Consumers had remained cautious after incomes took a knock during the pandemic and sporadic virus outbreaks more recently restricted travel and spending. The June pickup in retail sales may fuel optimism that the rebalancing in the economy toward consumption is taking shape.
The second-quarter data suggest Beijing can comfortably meet its growth target of more than 6% for the year, and continue to drive global markets for commodities and industrial goods. But a slowing recovery is a possible sign the economy is more reliant on policy support than before the pandemic, a warning to other major economies as they ponder an exit from stimulus.
The offshore yuan extended declines, falling 0.1% to 6.4687 per dollar. 10-year government bond futures stayed lower while the stock benchmark CSI 300 Index pared some losses.
In a surprise move last week, China’s central bank said it will cut the amount of cash banks must hold in reserve, freeing up about 1 trillion yuan ($155 billion) in liquidity that could be used to boost lending. The move went further than many economists had expected and suggested growing concerns about the economy’s growth outlook.
Earlier Thursday, the People’s Bank of China rolled over a portion of medium-term policy loans coming due, a move that confirms its intention to keep monetary policy largely unchanged. The 100 billion yuan of loans offered to banks is in addition to the liquidity from the reserve requirement ratio cut that comes into effect today.
Premier Li Keqiang also sounded a cautious note this week about the economy’s outlook, warning the nation needs to prepare for cyclical risks and make counter-cyclical adjustments.
(Updates with market reaction in fifth paragraph.)
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