China's GDP rose 5.3% in the first quarter, but it doesn't mean the economic pain is over

• China's economy grew 5.3% in the first quarter of 2024, surpassing analyst expectations.
• Despite this, March retail sales and industrial output fell short of forecasts.

China reported robust economic growth for the first quarter of 2024.

The world's second-largest economy grew 5.3% in the first quarter of this year from a year ago, according to the National Bureau of Statistics — beating the 4.8% growth analysts polled by Bloomberg had forecast and the 5.2% growth it chalked up in the fourth quarter of 2023.

"We have got off to a solid start," Sheng Laiyun, the NBS's deputy director, said at a press briefing in Beijing, according to Bloomberg. He said industry was an important contributor to growth, contributing to more than one-third of first-quarter growth.

Louise Loo, the China economist at Oxford Economics, wrote in a note on Tuesday that China's economy was also supported in the first quarter by consumer spending for the Lunar New Year holidays in February.

Despite the rosy figures, a closer look at the figures indicates there's still pain ahead.

March retail sales rose 3.1% from a year ago, missing Bloomberg forecasts of 4.8% growth. Industrial output for March also missed forecasts, coming in at 4.5% — well below the 6% predicted by analysts.

"'Standalone' March activity indicators suggest weakness coming through post-Lunar New Year," Loo said.

In particular, China's property market continued to be in the dumps amid a debt crisis, with first-quarter new home sales by value tanking nearly 31% from a year ago.

Notably, the data didn't include China's youth-unemployment rate, which hit a record high of 21.3% in June 2023 before Beijing revamped the methodology for the metric to exclude full-time students.

China is in a 'two-speed economy'

China's data dump on Tuesday reflects the country's changing economic landscape.

China's economy has traditionally relied on growth from real estate and lower-cost manufacturing. Beijing is now trying to pivot to three new drivers in the green sector: electric vehicles, solar cells, and lithium-ion batteries.

This has created a "two-speed economy" in which some sectors are doing well — but still aren't enough to offset the massive slump in the property sector, which accounts for about one-quarter of China's GDP.

"The recent economic recovery has been driven by exports. I think it is a two-speed economy," said Raymond Yeung, the chief China economist at ANZ, according to Reuters. "Domestic demand is still weak, but exports are good."

Yeung said he expected China's economy to continue on a similar path in the second quarter of the year.

Oxford Economics' Loo meanwhile expects headwinds to China's second-quarter growth as household spending normalizes and as inventory build-up is released onto the market.

China has a growth target of about 5.0% this year.