China’s economy accelerated for a second-straight quarter as investment picked up, retail sales rebounded and factory output strengthened amid robust credit growth and further strength in property markets.
Gross domestic product increased 6.9% in the first quarter from a year earlier, compared with a 6.8% median estimate in a Bloomberg survey. It was the first back-to-back acceleration in seven years.
Other indicators released Monday by the National Bureau of Statistics showed:
- Fixed-asset investment excluding rural areas expanded 9.2% for the first three months, accelerating from 8.1% growth last year
- Retail sales increased 10.9% from a year earlier in March, compared with a median estimate of 9.7% in a Bloomberg survey
- Industrial output rose 7.6% last month from a year earlier, compared with an estimated 6.3% rise.
“For the first time in the recent years, China starts a year with a strong headline GDP,” said Raymond Yeung, chief greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong, who correctly forecast the growth pace. “Thanks to strong investment and property, the economy is performing well.”
The expansion further cements a rebound as producer prices surge, industrial output picks up and soaring credit fuels investment. Policy makers have shifted to a more neutral monetary stance as they seek to ease financial risk and reduce excess industrial capacity.
“The first quarter growth is mainly driven by reflation and very strong property sales and investment,” said Larry Hu, head of China economics at Macquarie Securities Ltd. in Hong Kong. “This strong data would give more confidence to maintain a tightening stance.”
The broadest measure of new credit rose more than estimated last month amid strong growth in shadow banking. Aggregate financing grew 2.12 trillion yuan ($308 billion).
In current-price terms, the economy expanded 11.8% from a year earlier, according to Bloomberg Intelligence estimates. “That’s making the problem of excess leverage look a little more manageable–at least as long as factory reflation stays strong,” BI economists Tom Orlik and Fielding Chen wrote in a report.
The labor market has been holding up too: The surveyed jobless rate fell in March from February, while the level in big cities was below 5% at end of last month, the NBS said. China added 3.34 million new jobs in the first quarter.
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