Not that it matters now, and with the caveat that the deflator was negative again, the Chinese economy outperformed expectations in Q1.

Growth was 5.4% last quarter, better than the 5.2% consensus expected, the NBS said Wednesday. It was the second consecutive quarter during which growth ran at a 5.4% clip.

If trade tensions persist, that pace won’t likely be sustainable, even if Xi Jinping’s statisticians can flatter the real growth headline with the deflator. Nominal growth was 4.6% in Q1.

As the figure shows, Q1 marked the eighth straight quarter during which the implied GDP deflator was negative.

The Q1 growth tally benefited from front-loaded trade as buyers around the world rushed to get product before Donald Trump slapped his economic bête noire with still more levies.

Exports rose in March by more than 12% YoY. Tellingly, shipments to Thailand and Vietnam hit record highs, evidence of attempts to circumvent the tariffs.

Imports, by contrast, shrank 4.3%, double the decline economists anticipated.

“The strength in Q1 was overstated by export front-loading, which continued to make a larger-than-usual contribution to GDP growth,” SocGen’s Wei Yao and Michelle Lam said Wednesday, commenting on the growth figures. “The contribution from net trade to real GDP growth YoY eased from the whopping 2.5ppt in Q4 to a still-significant level.”

Again, that tailwind’s going to come under a lot of pressure going forward. The US and China are now engaged in a tariff war that makes the trade spat during Trump’s first term look tame.

China insists the economy’s going to grow by 5% this year regardless. To the extent that’s feasible, Xi desperately needs to resuscitate domestic demand. On that front, Wednesday’s raft of data offered some good news: Retail sales rose 5.9% in March, allegedly.

As the figure shows, that was the briskest YoY pace since December of 2023, and if it’s accurate, it’s encouraging. Consensus expected just 4% from that print.

Industrial output rose a very brisk 7.7% last month, the same data showed. That was the fastest in years. Fixed asset investment rose 4.2% over the first quarter, and the urban jobless rate ticked down to 5.2% in March.

The NBS tipped more stimulus to counter what it described as still “insufficient” domestic demand in the face of an external environment that’s “becoming more complex and severe.”

So far, the Party’s fiscal efforts are still best described as piecemeal, but that could change depending on the severity of the trade war. There’s room for the PBoC to act too, of course, but as ever, the price of money (and credit) is irrelevant if households are retrenching and de-leveraging. China needs the government to be a spender of last resort, currently, not a lender of last resort.

“The short-term impact [of the trade war on] the labor market is likely to be extremely tricky to deal with, not just for the economy but also for social stability,” SocGen said, in the same Wednesday note. “Policymakers are already undertaking active intervention in the stock market and accelerating special CGB issuance, and a near-term RRR cut is possible to ease liquidity constraints.”

On Wednesday, Bloomberg said Beijing will only agree to trade talks if US officials start “showing more respect by reining in disparaging remarks.” If that sounds familiar, it should: I said just that on Tuesday afternoon, in “Waiting For A Call.”

Commenting further on Wednesday’s data, SocGen’s Lam said “all of this is in the past now.” “Some high-frequency data has already started to show a sharp drop in US imports from China,” she went on, noting that SocGen recently revised their 2025 and 2026 GDP growth forecasts for China lower to just 4%, and even that “assum[es] additional stimulus of 2.5% of GDP.”