Citizens shop for food at a street stall in Chengdu, Sichuan Province, China on June 22, 2021.
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BEIJING – China reported better-than-expected growth in retail sales, fixed assets investments and industrial production on Tuesday at the start of the year.
The data releases combine the two months of January and February, as is the custom of the Chinese statistical office to avoid distortions due to the Lunar New Year holidays, which can fall in both months depending on the year.
Retail sales grew 6.7% year-over-year, beating analysts surveyed by Reuters expectations for a 3% growth from a year ago. Furniture was the only category within retail sales to decline, down 6%. Petroleum products and gold, silver and jewelery recorded the largest increases.
Steady growth in auto sales, after declining for much of last year, has helped to boost retail sales, as well as consumer demand during the Lunar New Year holidays and interest in Olympics-related products. Fu Linghui, spokesman for the National Bureau of Statistics told reporters at a press conference on Tuesday.
He noted, however, that recent Covid outbreaks would likely limit consumption in some areas and the basis for consumer spending to pick up is still not solid.
“Certainly, reaching the full-year target of about 5.5 percent will require a lot of effort,” Fu said in Mandarin, according to a translation by CNBC.
Industrial production also beats, up 7.5% compared to expectations of 3.9% growth.
Investments in fixed assets increased by 12.2%, well above the forecast of a 5% increase. Among investments in fixed assets, that in high-tech manufacturing recorded one of the largest increases, with an increase of 42.7%. Infrastructure investments grew by 8.1%. Investments in real estate development increased by 3.7%, although the commercial area sold decreased by 9.6%.
The real estate sector – which contributes about a quarter of GDP – has collapsed since Beijing began cracking down on developers’ high dependency on debt over the past two years.
Sian Fenner, chief economist for Asia at Oxford Economics, said on CNBC’s “Street Signs Asia” that he expects increased fiscal spending will boost infrastructure development, but not enough to offset the slowdown in the real estate sector. He expects the stimulus to work through the economy, enough to boost growth to an expected 4.9% this year and close to 5.4% next year.
The unemployment rate in cities rose to 5.5% in February from January, with that of those aged 16 to 24 remaining much higher at 15.3%.
“The national economy has sustained a steady recovery, production demand grew rapidly, employment and prices were generally stable, new driving forces continued to develop, and high-quality development made new progress,” said L ‘bureau of statistics in a note.
Last week, China’s central government announced an official GDP target of “around 5.5%” for the year.
Many economists have said the goal is ambitious, especially after a resurgence of Covid cases forced factories to stop production.
Iris Pang, chief economist for Greater China at ING, said on CNBC’s “Squawk Box Asia” on Tuesday before the data release that she is considering a downward revision of her GDP forecast by 6.8% due to the situation of Covid.
The new restrictions hit big cities like Shenzhen and Shanghai in the worst pandemic wave the country has seen since the initial shock just over two years ago.
These developments will affect the economic recovery locally, but not so much nationally, said NBS’s Fu.
But he warned that many risks to growth remain in the coming year.
“The international environment is quite complex and severe,” he said. “In particular, the Russia-Ukraine military conflict and geopolitical tensions have caused high volatility in international commodity prices and their impact on domestic production cannot be ignored.”
– Charmaine Jacob and CNBC’s Chelsea NGO contributed to this report.