China’s upbeat industrial output, retail sales tempered by frail property

Mar18,2024



Beijing: China's factory production and Retail Sales The January-February period beat expectations, signaling a solid start to 2024 and giving policymakers some respite despite the weakness. property area There is pressure on the economy and confidence.
Industrial output rose 7.0% in the first two months of the year, according to data released on Monday by the National Bureau of Statistics (NBS), better than the 5.0% rise expected in a Reuters poll of analysts and the 6.8% rise seen. Is faster. In December it recorded its fastest growth in nearly two years.
Retail sales, a measure of consumption, rose 5.5%, slowing from 7.4% growth in December. Analysts had expected retail sales to rise 5.2%.
The eight-day Lunar New Year holidays in February saw a solid rebound in travel, supporting revenues of the tourism and hospitality sectors.
“China's activity data broadly stabilized at the start of the year. But there are still reasons to think there may be some strength one-off,” said Lewis Lu, China economist at Oxford Economics.
“Consumers were temporarily buoyed by festive-related spending at the beginning of the year. In the absence of decisive consumption-related stimulus this year, we think it will be difficult to maintain a strong position.” “The pace of consumer spending this year.”
Real estate investment in the first two months of 2024 increased by 4.2% compared with the same period a year earlier, while a 3.2% increase was expected. It increased by 3.0% for the whole of 2023.
Specifically, private investment rose 0.4% in the first two months, reversing a decline of 0.4% for the full year of 2023.
With better-than-expected trade data and consumer inflation, Monday's indicators will provide some temporary encouragement for policymakers as they try to boost growth in the world's second-largest economy that is on track to expand by about 5% this year. Can be kept on track. ,
property distress
But analysts say achieving such growth will be more challenging than last year, which had a lower base effect in 2022 due to Covid restrictions. Furthermore, the property sector remains weak and may remain a major hindrance to a solid recovery this year.
Ziwei Zhang, chief economist at Pinpoint Asset Management, said the economic outlook in the second quarter remains uncertain, noting that asset sales “decelerated” while the unemployment rate rose.
Property investment declined 9.0% year-on-year in January-February, compared with a 24.0% decline in December, but still far from levels reaching stability.
Poor sales exposed the sector's weakness. Property sales by floor area declined by 20.5% in January-February compared to a year earlier, compared to a 23.0% decline in December last year.
The job market worsened as the nationwide survey-based unemployment rate stood at 5.3% in January-February, up from 5.1% in December.
The NBS jointly publishes industrial production and retail sales data for January and February to eliminate distortions caused by the changing timing of the Lunar New Year. Activity picked up in the first two months of 2023 as Covid restrictions were lifted, which could create a less attractive base effect for this year's data.
Prime Minister Li Kiang promised to transform the country's growth model and reduce risks in the property sector and local government debt at the annual parliamentary meeting earlier this month.
China plans to issue 1 trillion yuan in special ultra-long-term treasury bonds to support some key sectors and set higher quotas for local government special bond issuance this year.
The country's central bank governor Pan Gongsheng also said at a press conference on March 6 that there is still room for a cut in banks' reserve ratio requirement (RRR), following the 50 basis points cut announced in January, within two years. The biggest cut was. ,
Expectations of global monetary easing may also provide some relief to China's hopes of strengthening its huge manufacturing sector, although the economic situation in many major developed countries looks bleak in the near term. Britain fell into recession in the second half of last year, while Japan and the euro zone saw modest growth.
Policymakers have promised more measures to help stabilize growth after measures implemented since June had only a modest impact, but analysts warned that Beijing's fiscal capacity is now very limited and note That Lee's address at the annual parliamentary meeting failed to inspire investor confidence.
Many economists say there is a risk that China could begin to suffer Japan-style stagnation later this decade unless authorities re-orient the economy toward domestic consumption and market-allocation of resources. Do not take steps to do so.



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