The Chinese economy accelerates in January-February; Omicron cases cloud outlook
- Industrial production Jan.-Feb. +7.5% y/y vs f’cast +3.9%
- Retail sales +6.7% y/y vs f’cast +3.0%
- Investment in fixed assets +12.2% y/y, vs f’cast +5.0%
- Strength may not last as COVID cases jump – analysts
BEIJING, March 15 (Reuters) – China’s economy rebounded in the first two months of 2022, with key indicators all beating analysts’ expectations, although an increase in Omicron business, weak real estate and heightened global uncertainties weigh on the outlook.
Industrial production rose 7.5% in January-February from a year earlier, the fastest pace since June 2021 and up from a 4.3% increase seen in December, Tuesday showed data from the National Bureau of Statistics. This compared to a 3.9% rise expected by analysts in a Reuters poll.
Retail sales, a lagging indicator of consumption since the hit of COVID-19, rose 6.7% year-on-year amid rising demand during the Lunar New Year holidays and the Olympics. winter. It also marked the fastest clip since June last year and beat expectations for a 3.0% rise in the poll.
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It posted a 1.7% gain in December.
The surprisingly strong performance of the world’s second-largest economy in the new year may have enabled the People’s Bank of China (PBOC) to keep its policy rates stable on Tuesday, said Iris Pang, chief economist for Greater China at ING, in a note.
The PBOC kept its one-year medium-term lending rate unchanged earlier in the day, dashing expectations of a cut, although investors believe policymakers may soon resume monetary easing to support the slowdown. economy. Read more
The statistics released combine economic data from January to February to help smooth out distortions caused by the Lunar New Year holiday, which fell in early February this year.
One of the data highlights was strong retail sales growth, which was boosted by sales of Winter Olympics-related products, such as ski gear and ice sports, Fu said. Linghui, spokesperson for the statistics bureau, at a press conference.
Bing mascot Dwen Dwen was an unexpected star of the Beijing Olympics, with thousands of fans queuing in sub-freezing temperatures to buy goods – from magnets and key rings to bags and soft toys – and factories scrambling to make more. Read more
The strong numbers came after growth lost momentum throughout last year due to a liquidity crunch in the housing market and stringent anti-virus measures that hit consumption.
“Indeed, every data point has bounced back, mainly because the political effects started early this year, with an easing in the infrastructure and real estate sectors. Restoration spending also remained relatively strong,” said Qu Qing, chief economist at Jianghai Securities.
However, analysts warn that any nascent recovery, which would help China reach an ambitious target of around 5.5% for 2022, could not be sustained due to the surge in COVID cases, a weak real estate market and the uncertain global recovery. Read more
Chinese stocks fell sharply on Tuesday as a rise in coronavirus cases overshadowed data and threatened the outlook.
“The momentum of economic recovery in January-February has been good. At the same time, we must also see that the external environment is still complex and severe, and China’s economic development faces many risks and challenges. “said Mr. Fu from the statistics office.
Analysts expect the central bank to continue to ease policy to support the economy.
“We still need to cut interest rates and reserve requirement ratios as soon as possible. There should be no hesitation in supporting easing policies,” said Wang Jun, chief economist at Zhongyuan Bank.
Premier Li Keqiang said last week that he was confident of achieving the economic growth target of around 5.5% for this year despite challenges including the war in Ukraine. Li also promised to provide more political support during the year. Read more
RESUMPTION OF INVESTMENTS IN INFRASTRUCTURES
Investments in fixed assets rose 12.2% in January-February from a year earlier, compared with a 5.0% increase predicted by a Reuters poll and 4.9% growth in 2021. The figure was the highest since July last year.
Investments in infrastructure rose 8.1%, helped by the move to this year’s early-loading 2022 local government special bonds.
Real estate investment rose 3.7% year on year in the first two months of 2022, following a 13.9% plunge in December, the data showed.
The slowdown in the housing market has also shown signs of easing, but sales are still mired in contraction while new construction starts have fallen by double digits.
“We continued to stabilize land prices, house prices and expectations, and there were positive changes in the real estate market,” Fu said.
China’s property market cooled last year as Beijing’s deleveraging drive triggered a liquidity crunch in some major property developers, leading to bond defaults, plummeting stock prices and suspended or suspended projects. left unfinished.
“The resurgence of COVID in several provinces is an additional drag on activity growth. Despite the relaxation of local real estate policy, real estate indicators, in particular new housing starts and land sales, have continued to Further policy easing would be needed to meet the challenging roughly 5.5% ‘growth target this year,’ Goldman Sachs analysts wrote in a note.
The national survey-based unemployment rate rose to 5.5% in February from 5.3% in January, but Fu said the rise was largely due to seasonal factors and the rate could drop after March.
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Additional reporting by Ellen Zhang, Liangping Gao and Ryan Woo; Editing by Sam Holmes, Bernard Orr
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