(Bloomberg) — China’s economic activity strengthened in the first two months of the year as investment picked up and consumer spending recovered following the ending of Covid restrictions.
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Retail sales rose 3.5% from the same period last year, figures from the National Bureau of Statistics showed Wednesday, reversing from a 1.8% drop in December. That was in line with economists’ predictions.
Industrial output grew 2.4% in the two-month period, compared with 1.3% in December, missing economists’ forecasts of 2.6% expansion.
Fixed-asset investment climbed 5.5% during the two-month period, better than the 4.5% estimate and 5.1% growth for the whole of last year. The jobless rate unexpectedly rose to 5.6%.
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China’s Economy Rebounded in First Two Months of 2023 | Retail sales growth in line with forecasts, industrial output slightly weaker
China abruptly dropped its Covid Zero strategy in December, leading to a surge in infections through January. Cases peaked earlier than expected, though, prompting people to travel and spend again and providing a boost to the services sector. Factories also benefited as logistics bottlenecks and restrictions ended.
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The National Bureau of Statistics usually combines the data releases for the two months of January and February to avoid distortions from the Lunar New Year holiday, which can fall in either month depending on the year.
The rebound will be encouraging news to the top leadership, who have made economic growth a top priority this year. Beijing set a modest target for gross domestic product growth of around 5% for this year, signaling it will avoid any big stimulus through infrastructure investment or the property market. However, a fairly ambitious job creation goal of “around 12 million” suggests policy will remain supportive.
China’s new Premier Li Qiang said Monday the growth target “is not an easy task“ and “requires redoubled efforts.” The nation will prioritize stability in growth, prices and jobs, while seeking to make progress in high-quality development, he said.
The median estimate in a Bloomberg survey shows the economy will likely expand by 5.3% this year from a year earlier.
Whether the recovery can be sustained this year will depend on what happens with waning global demand, the struggling property market and still-weak consumer confidence. Beijing will also need to cope with longer-term challenges such as the increase in sanctions by the US, rising geopolitical tensions, and the aging population and shrinking workforce.
–With assistance from Yujing Liu and Fran Wang.
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