Citizens buy food from a street stall in Chengdu, Sichuan province, China, June 22, 2021.
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BEIJING — China on Tuesday reported better-than-expected growth in retail sales, capital investment and industrial production to start the year.
The data releases combine the two months of January and February, as required by China’s statistics office, to avoid distortions due to the Lunar New Year holiday, which may fall in either month depending on the situation. ‘year.
Retail sales rose 6.7% year-on-year, beating analysts’ expectations polled by Reuters for growth of 3% from a year ago. Furniture was the only retail category to decline, down 6%. Petroleum products and gold, silver and jewelry saw the biggest increases.
Steady growth in auto sales – after declines for much of last year – has helped boost retail sales, as well as consumer demand around the Lunar New Year holiday and interest in Olympics-related products, said Fu Linghui, spokesman for the National Bureau of Statistics. journalists at a press conference on Tuesday.
He noted, however, that the recent Covid outbreaks would likely restrict consumption in some areas, and that the fundamentals for the recovery in consumer spending are still not strong.
“It is certain that achieving the annual target of around 5.5% will require strenuous efforts,” Fu said in Mandarin, according to a CNBC translation.
Industrial production also beat, up 7.5% against growth expectations of 3.9%.
Investment in fixed assets rose 12.2%, well above expectations for a 5% increase. Within investment in fixed assets, high-tech manufacturing experienced one of the strongest increases, up 42.7%. Investments in infrastructure increased by 8.1%. Investment in real estate development increased by 3.7%, even though retail space sold fell by 9.6%.
The real estate sector – which contributes about a quarter of GDP – has slumped since Beijing began to clamp down on developers’ heavy reliance on debt over the past two years.
Sian Fenner, chief Asia economist at Oxford Economics, told CNBC’s “Street Signs Asia” that she expects increased fiscal spending to spur infrastructure development, but not enough to offset the real estate slowdown. She expects the stimulus to ripple through the economy, enough to boost growth to the projected 4.9% this year and nearly 5.4% next year.
The unemployment rate in cities rose slightly to 5.5% in February from January, with that of 16-24 year olds remaining much higher at 15.3%.
“The national economy maintained a steady recovery, production demand increased rapidly, employment and prices were generally stable, new driving forces continued to develop, and high-quality development made new progress” , the statistics office said in a statement.
Last week, China’s central government announced an official GDP target of “around 5.5%” for the year.
Many economists said the target was ambitious, particularly after a resurgence in Covid cases forced factories to halt production.
Iris Pang, chief economist for Greater China at ING, told CNBC’s “Squawk Box Asia” on Tuesday ahead of the data release that she was considering a downward revision to her forecast of 6.8% of GDP due to of the Covid situation.
The new restrictions have hit major cities like Shenzhen and Shanghai in the worst wave of the pandemic the country has seen since the initial shock just over two years ago.
These developments will affect economic recovery at the local level, but not so much at the national level, said NBS’s Fu.
But he warned that many risks to growth remain in the year ahead.
“The international environment is rather complex and harsh,” he said. “In particular, the Russian-Ukrainian military conflict and geopolitical tensions have caused high volatility in international commodity prices, and their impact on domestic production cannot be ignored.”
– CNBC’s Charmaine Jacob and Chelsea Ong contributed to this report.