China GDP: how will third quarter growth fare amid a power crisis, sluggish consumption and property curbs?

Buffeted on all sides by a property slump, energy crisis, weak consumer sentiment and soaring raw material costs, China’s third quarter economic growth could drop to as low as 4.9 per cent, analysts say.

But after posting 7.9 per cent gross domestic product (GDP) growth in the second quarter, economists have been steadily downgrading their growth forecasts ahead of Monday’s official data release.

Natixis has offered one of the most bearish outlooks, predicting a slump to 4.9 per cent growth in the third quarter, while both Standard Chartered Bank and the median estimate of analysts in a Bloomberg poll said the economy would expand at 5 per cent.

HSBC said “GDP growth is likely to slow markedly to the 4-5 per cent range in the rest of the year amid multiple headwinds”, and analysts surveyed by Reuters predicted a third quarter GDP growth rate of 5.2 per cent.

“After reaching a peak in the first quarter of 2021, China’s growth rate slowed down in the following months,” said Natixis’ chief Asia-Pacific economist Alicia Garcia-Herrero. “The trend was not unexpected, as the momentum from the post-Covid recovery subsided cyclically after a strong growth for almost a year. This is why our forecast for China’s GDP growth was set very conservatively at the beginning of 2021 [at 7.8 per cent for 2021] compared with the market consensus.

“Still, the market sentiment was less prepared for the inverse U-shaped trajectory in growth, especially after a series of negative events, including the Covid-19 outbreak in summer, the regulatory crackdown, the Evergrande crisis and the recent power crunch. All the above points to a more rapid slowdown in the third quarter of 2021.”