China announced that its first-quarter gross domestic product increased 7.4 percent, down from 7.7 percent in the last three months of 2013. Today’s reading was the slowest pace in a year and a half, but it still came in slightly above analysts’ expectations.
On the positive front: Employment and income growth held up well even as the economy continues to slow, 3.44 million jobs were created in the first three months—40,000 more than a year earlier—and migrant-worker employment also grew. While urban incomes expanded 7.2 percent, to 8,155 yuan ($1,311), those of rural residents rose by an even stronger 10.1 percent, to 3,224 yuan, according to Sheng Laiyun, a spokesman for China’s National Bureau of Statistics spokesman.
Most worrisome, however, is the clear cooling of China’s property market. The value of homes sold, 1.1 trillion yuan, dropped 7.7 percent. Broader property sales including commercial buildings reached 1.33 trillion yuan, down 5.2 percent. New property construction amounted to 291 million square meters, dropping 25.2 percent—that’s the worst first-quarter performance since 2009 and a signal that property developers are worried about sales over the rest of the year.
“The property sector witnessed broad-based weakening, from home sales, new starts, land acquisition to secured funding for investment,” write Ding Shuang and Shen Minggao, economists at Citigroup (C) in Hong Kong, in a report released on Wednesday. “The data confirms anecdotal reports of market correction in some smaller cities.” Urban real estate investment amounts to more than 10 percent of China’s economy.
“We should keep in mind that the external environment remains complicated and volatile, and the national economy still faces downward pressure,” the statistics bureau said in a statement. “China had a weak Q1—and Q2 will be weaker in our view,” Stephen Green, chief China economist at Standard Chartered (STAN:LN) in Shanghai, predicts in a note today.