April 18, 2018 / 4:07 AM / 8 months ago

Strong China first-quarter GDP growth supported by construction, manufacturing, hi-tech

BEIJING (Reuters) - China’s better-than-expected economic expansion in the first quarter was backed by a pickup in construction and industry, while a slowdown in the services and agriculture sectors dragged on growth, official data showed on Wednesday.

An employee operates a crane to lift aluminium wires at a warehouse in Zouping county, Shandong province, China April 18, 2018. China Daily via REUTERS

The construction and manufacturing sector grew 6.3 percent from a year earlier, accelerating from a 5.7 percent pace in the fourth quarter, according to more detailed data released by the National Bureau of Statistics a day after quarterly GDP.

China’s economy expanded 6.8 percent in January-March, beating expectations for a 6.7 percent gain, riding on the coat-tails of robust property investment and resilient consumer demand.

Manufacturing also rebounded early this year after authorities lifted winter pollution restrictions and as steel mills cranked up output as construction swung back into high gear.

But economists still expect China to lose momentum in coming quarters as Beijing forces local governments to pare back infrastructure projects to contain their debt, and as property sales cool further due to strict government controls on purchases to fight speculation.

More than 100 cities have introduced some measures to cool home prices. Still, analysts expect moderate price appreciation in China’s vast number of smaller centers where regulations are less restrictive.

“We think the pick-up in industry and construction will prove short-lived as the temporary boost to factory activity from the easing of pollution controls fades and tighter restrictions on off-budget spending by local governments weigh on infrastructure investment,” said Julian Evans-Pritchard, senior China economist at Capital Economics.

China’s construction and manufacturing accounted for 39 percent of gross domestic product in the first quarter, roughly in line with its 41 percent share in the previous quarter, according to Reuters calculations based on statistics bureau data.

The services sector continued to be the biggest contributor to GDP, accounting for 57 percent of China’s economic output in the first quarter.

Services grew 7.5 percent from a year earlier, slowing from 8.3 percent in the fourth quarter, while agriculture expanded 3.2 percent in January-March, easing from the 4.4 pace in the previous three months.

Real estate grew 4.9 percent in the first quarter, marginally faster than the 4.8 percent pace in the previous quarter.

Accommodation and catering expanded 7.0 percent, little changed from 7.1 percent growth in October-December.

The retail and wholesale sector slowed slightly to 6.8 percent growth from 6.9 percent in the previous quarter.

The sector faces headwinds, with property sales and retail sales both vulnerable to a weakening labor market, slower credit growth and government controls on property purchases, Evans-Pritchard said.

The tech sector sustained its double-digit growth in the first quarter, though its pace slowed slightly to 29.2 percent from 33.8 percent in October-December.

Reporting by Ryan Woo; Editing by Kim Coghill

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