China Industrial Output Growth Strengthens; Retail Sales Rebound

China’s industrial production growth strengthened in January to February period and retail sales rebounded after the relaxation of the pandemic related restrictions, official data revealed Wednesday.

Industrial output grew 2.4 percent on a yearly basis in January to February period, faster than the 1.3 percent increase posted in December, the National Bureau of Statistics reported. However, the pace was slightly weaker than the expected 2.6 percent rise.

At the same time, retail sales advanced 3.5 percent from the last year, in contrast to the 1.8 percent decline in December. The rate came in line with expectations.

In the first two months of the year, fixed asset investment increased 5.5 percent annually, which was bigger than economists’ forecast of 4.4 percent.

In the month of February, the surveyed unemployment rate rose by 0.1 percentage points to 5.6 percent.

The economy steadily recovered with rising production demand, stable employment and consumer prices and improved market expectations in the first two months of the year, NBS spokesperson Fu Linghui said.

Although consumption should rise moderately this year, there are headwinds for China, including exports and local government debt that could derail infrastructure investment, and the slow recovery of the real estate sector, Iris Pang, an ING economist said. The firm retained its growth outlook at 5.0 percent for 2023.

The government had set a moderate growth target of about 5.0 percent for this year.

The International Monetary Fund has projected China’s GDP growth to rise to 5.2 percent in 2023 that reflects the rapidly improving mobility. However, growth is projected to weaken to 4.5 percent next year before settling at below 4 percent over the medium term.

The People’s Bank of China on Wednesday added CNY 481 billion liquidity into the financial system via one-year medium-term lending facility. The rate on the MLF was maintained at 2.75 percent.

The bank also injected CNY 104 billion through seven-day reverse repo operations at an interest rate of 2.0 percent.

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