China’s economy grows 5.2% as factories offset weak consumption

China’s economic growth exceeded expectations in the second quarter, but strong exports to markets outside the US masked deepening pressure caused by weak consumer demand at home.

Gross domestic product expanded 5.2% in April-June from a year earlier, according to data released Tuesday by the National Bureau of Statistics. That compares with a 5.1% median forecast from economists surveyed by Bloomberg and a gain of 5.4% in the first quarter.

Benchmark Chinese stock indexes in Hong Kong and on the mainland largely held on to their early gains after the data. The yuan was steady while the yield on China’s 10-year government bond was little changed.

Industrial output rose 6.8% in June from a year earlier, faster the 5.6% expansion forecast by economists. Retail sales increased 4.8% last month, worse than economists’ projection.

“So again it’s a picture of strong supply but weak domestic demand, and export resilience is not going to last,” said Michelle Lam, Greater China economist at Societe Generale SA. ”Not a good set of data despite the GDP beat.”

Highlights of other key economic indicators:

•Fixed-asset investment rose 2.8% over January-June, while property investment shrank 11.2% during the period

•The urban jobless rate was 5% in June, unchanged from the previous month

“The economy maintained steady growth with good momentum, showcasing strong resilience and vitality,” the NBS said in a statement. It also warned that “there are many unstable and uncertain factors” abroad while domestic demand “is insufficient.”

The world’s second-largest economy has powered ahead despite a 24% slump in shipments to the US in the second quarter. Overall exports still rose, while fiscal stimulus propped up domestic demand and construction.

That resilience provides Beijing breathing room to prepare a further policy response in case trade tensions with Washington flare up again when the current tariff truce ends in mid-August.

The People’s Bank of China has repeatedly signaled it’s in no hurry to deploy broad-based easing, instead favoring targeted support through structural lending tools to direct credit to priority areas and avoid idle liquidity in the financial system.

Government subsidies, financed by proceeds from ultra-long special sovereign bond sales, have been key to boosting household purchases of smartphones and home appliances this year, as well as corporate investment in new equipment.

Central and local authorities still have more than 7 trillion yuan ($976 billion) of bonds that will be issued in the second half of the year to help support economic growth, according to an earlier state media report.

Looking ahead, the Chinese economy still contends with challenges including the risk of slower exports amid uncertainties over US President Donald Trump’s tariffs. Domestic demand remains fragile, weighed down by deflationary pressures stemming from excess manufacturing capacity and weak confidence as the property sector continues to contract.

Expectations for further support to the ailing real estate industry are rising, with speculation that a high-level government meeting is being held to address the issue. Investors also reacted positively to signals from policymakers aimed at curbing “involution,” referring to cutthroat competition among firms.

Some economists expect quasi-fiscal tools to be revived to inject stimulus, while others have called for more aid to consumers should US tariffs be raised further.