China's first-quarter GDP beat expectations, but consumption and real estate remain the main drags

Overview

This report analyzes China's first-quarter 2026 GDP and key March macro data. Goldman Sachs notes that first-quarter real GDP growth rose to 5.0% year-on-year and nominal GDP growth rose to 4.9% year-on-year, both generally better than expected; however, the economy remains clearly divided internally, with manufacturing and exports relatively strong while real estate and consumer spending are weak.

Core views

Goldman Sachs' core judgment is that the stronger-than-expected first-quarter growth mainly came from the year-on-year GDP performance and revisions to some historical quarter-on-quarter data; March industrial production, while still above market expectations, slowed from January-February; momentum in fixed asset investment and retail sales weakened; real estate activity remained at low levels but improved at the margin; and employment pressure increased somewhat. Since macro data have been better than expected since the start of the year, policymakers are not in a hurry to launch large-scale stimulus in the short term.

Analysis framework

The report assesses changes in GDP, industrial production, fixed asset investment, retail sales, services output, real estate activity, and the unemployment rate by comparing year-on-year, quarter-on-quarter, seasonally adjusted quarter-on-quarter, and sector-level data, and contrasts Goldman Sachs forecasts, market expectations, and official data.

Methodology notes

• Macro Data TrackingAsia MAP Score

  Relative performance of macro data versus expectations

  The report uses the Asia MAP Score to track how key macro indicators such as GDP, industrial production, fixed asset investment, and retail sales perform relative to expectations.

• Growth ForecastingReal GDP Forecast Framework

  Annual and quarterly real GDP growth forecasts

  Combining official historical data revisions, base effects in year-on-year comparisons, quarter-on-quarter growth momentum, and sector trends, Goldman Sachs maintains its forecast of 4.7% real GDP growth for both 2026 and 2027.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• China's Macroeconomy

  Research subject

  Strengths

  First-quarter GDP beat expectations, manufacturing and exports performed strongly, and nominal growth improved.

  Weaknesses

  Consumption, real estate, and employment data were weak, with clear economic divergence.

  Comparison

  Real GDP year-on-year growth rose from 4.5% in the fourth quarter to 5.0% in the first quarter.

  Risks

  If real estate weakens again, external tariff pressure intensifies, or consumption remains sluggish, subsequent growth momentum could be weaker than forecast.

• Manufacturing

  Growth support

  Strengths

  Manufacturing investment year-on-year growth rose from 3.1% in January-February to 4.8% in March, with strong auto and chemical output.

  Weaknesses

  Output growth slowed for non-metallic products, electrical machinery, computers, and other equipment.

  Comparison

  Industrial production year-on-year growth fell from 6.3% in January-February to 5.7% in March.

  Risks

  External demand, base effects, and slower output growth in some sectors may limit subsequent industrial growth.

• Real Estate

  Main drag

  Strengths

  Declines in sales area, sales value, housing starts, and completions narrowed compared with January-February.

  Weaknesses

  Real estate investment, sales, housing starts, completions, and floor space under construction all still declined year-on-year.

  Comparison

  In March, real estate sales area fell 7.5% year-on-year and sales value fell 13.4% year-on-year, with narrower declines than in January-February.

  Risks

  Downward pressure on housing prices and continued contraction in investment may keep dragging on domestic demand.

• Consumption

  Demand-side area to watch

  Strengths

  Offline goods sales turned positive year-on-year, and gasoline and petroleum product sales improved, supported by oil prices.

  Weaknesses

  Retail sales, online goods sales, catering, home appliance sales, and auto sales all slowed.

  Comparison

  March retail sales year-on-year growth slowed from 2.8% in January-February to 1.7%.

  Risks

  Employment pressure and weak real estate wealth effects may restrain the consumption recovery.

Key data

• First-quarter 2026 real GDP year-on-year growth5.0%Above Goldman Sachs' forecast of 4.7% and Bloomberg market expectation of 4.8%.
• First-quarter 2026 nominal GDP year-on-year growth4.9%Above the fourth quarter's 3.9%, helped by improved inflation.
• March 2026 industrial production year-on-year growth5.7%Above Goldman Sachs' forecast of 5.6% and market expectation of 5.3%, but below 6.3% in January-February.
• March 2026 fixed asset investment year-on-year growth1.7%Below Goldman Sachs' forecast of 2.2% and market expectation of 1.9%.
• March 2026 retail sales year-on-year growth1.7%Below Goldman Sachs' forecast of 3.2% and market expectation of 2.4%, slowing from 2.8% in January-February.
• March 2026 services output index year-on-year growth5.0%Slightly below 5.2% in January-February, but still stronger than goods consumption.
• March 2026 nationwide surveyed unemployment rate5.4%Above 5.3% in January-February.
• 2026/27 real GDP growth forecastboth 4.7%Goldman Sachs maintains its full-year forecasts unchanged.

Impact & implications

For investors, the macro implication of the report is that China's growth data appear stronger than expected on the surface, but structural pressures remain concentrated in real estate, consumption, and employment. Near-term policy expectations may cool because GDP has reached the upper end of the annual growth target range, reducing the need for immediate additional stimulus. At the sector level, autos and chemicals supported industrial production, while non-metallic products, electrical machinery, computer equipment, home appliances, furniture, building materials, and auto retail remained under pressure.

Risks

• The real estate market could weaken again and drag down investment and household confidence.
• Higher U.S. tariffs and changes in external demand could hit exports and manufacturing.
• Consumer spending could remain weak, especially with pressure on sales of autos, home appliances, furniture, and building materials.
• Rising labor market pressure could affect household income and consumption expectations.
• Policy stimulus weaker than market expectations could affect risk appetite.

What to watch

• Whether the April Politburo meeting will introduce major stimulus measures.
• Whether the GDP deflator can turn positive in the second quarter.
• Whether real estate sales, housing prices, housing starts, and investment data continue to improve at the margin.
• Whether retail sales and services consumption reaccelerate.
• Whether the divergence among autos, chemicals, electronic equipment, and non-metallic products in industrial production persists.
• The trend of surveyed unemployment rates nationwide and in 31 major cities.