China consolidates comeback with upbeat industrial, retail data

Beijing's ability to contain the coronavirus pandemic before other major economies has allowed it to rebound faster, helped by exports, demand and government stimulus

China consolidates comeback with upbeat industrial, retail data
Customers wearing face masks walk past a Louis Vuitton store inside a shopping mall in Beijing. Retail sales rose 33.8% from a year earlier in the first two months, compared with a rise of 32% tipped by analysts. File photo by Reuters.

(ATF) China emphasised its rebound from the coronavirus pandemic on March 15, as a slew of better-than-expected data landed.

Industrial output rose 35% in the first two months of 2021, compared with a year earlier, up from a 7.3% on-year uptick seen in December, according to National Bureau of Statistics data. 

That was stronger than a median forecast of a 30% surge in a Reuters poll of analysts.

"One driver was stronger foreign demand – growth in industrial exports sales continued to strengthen," Julian Evans-Pritchard, senior China economist at Capital Economics, said. 

Retail sales in the period also rose 33.8% from a year earlier in the first two months, compared with a rise of 32% tipped by analysts, and just 4.6% growth in December and a 20.5% contraction in January-February 2020.

Louis Kuijs, head of Asia Economics at Oxford Economics, noted that real retail sales fell on a monthly basis amid New Year travel restrictions.

TOP GROWTH AREAS

The top three retail growth sectors were jewellery (sales of which rose nearly 99% year on year), cars (77%) and catering (69%). "These three items tell us that Chinese consumers spent lavishly during the Chinese New Year holiday," Iris Pang, chief China economist at ING, said.

"Catering is an item that was hurt very badly during Covid's social distancing measures," Pang noted. "And although there are still social distancing measures for catering in place, the high growth rate means that it is recovering form the pandemic."

However, China's ability to contain the coronavirus pandemic before other major economies were able to do so has allowed it to rebound faster, with the recovery helped by robust exports, pent-up demand and government stimulus.

The impressive numbers are in part due to distortions from last year's massive slump in activity. "The picture is more mixed after accounting for favourable base effects," Evans-Pritchard said.

BROAD-BASED RECOVERY

Analysts said the recovery appears to be broad-based with industrial output up nearly 17% compared with the first two months of 2019, before the pandemic struck.

An NBS official said that positive factors for China's economy are increasing but the foundation for the recovery is not yet solid.

Fixed asset investment increased 35% in the first two months from the same period a year earlier, slower than a forecast 40% jump.

That compared with 2.9% on-year growth in 2020, and a 24.5% plunge in January-February last year.

Investment grew 3.5% compared with the first two months of 2019.

Jian Chang, Barclays chief China economist, said the recovery is likely to trigger inflation.

"We expect a moderate rise in CPI inflation, as services and consumption recover further, and look for PPI inflation to extend its uptrend before likely peaking in May," she said.

With reporting by Reuters

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retail China industrial output data Bureau of Statistics data