China’s economic recovery is strengthening in the aftermath of Covid restrictions and outbreaks, with official data on Wednesday providing clues on how sustainable the rebound is likely to be.
(Bloomberg) — China’s economic recovery is strengthening in the aftermath of Covid restrictions and outbreaks, with official data on Wednesday providing clues on how sustainable the rebound is likely to be.
The government will publish data for the first two months of the year for retail sales, industrial output and investment, all of which are expected to show a rebound from December. Unemployment likely also eased last month.
While January activity was still fairly muted because of Covid infection waves and the Lunar New Year holidays, high frequency indicators show a notable pickup in consumer spending in February.
The outlook for industrial output remains less certain though, given a sluggish housing market and a slump in exports.
The new leadership under President Xi Jinping has set a modest growth target of around 5% for the year at the just-concluded National People’s Congress, suggesting any big stimulus through infrastructure investment or the property market is off the table.
The newly re-appointed central bank Governor Yi Gang also signaled monetary policy will largely be stable this year, though he didn’t rule out the possibility of reserve requirement ratio cuts to provide liquidity to the economy.
Here’s a guide on China’s economic data due at 10:00 a.m. on March 15:
Consumption
Consumer spending and confidence has gradually recovered after Covid Zero was dropped and the exit wave of infections eased. Some data for eating out and travel have shown double-digit growth from a year ago and big-ticket spending on cars and homes grew robustly in the past month.
Short-term household loans also picked up in February, the latest central bank data showed, indicating Chinese residents may be increasingly willing to borrow for consumption.
Economists expect retail sales to have grown 3.5% in January-February from the same period a year earlier, according to the median estimate in a Bloomberg survey, reversing from a 1.8% drop in December.
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.
Industrial Production
Factory output likely received a boost as restrictions to production and bottlenecks in logistics were removed following the scrapping of Covid Zero.
A sub-index of production in China’s survey of manufacturing purchasing managers jumped in February to the highest level in a over a decade, suggesting stronger momentum in factory output. Solid growth in new orders and an improvement in new export orders suggest factories will be kept humming for a period of time in the future.
Industrial output is seen expanding 2.6% year-on-year in the first two months, accelerating from an increase of 1.3% in the single month of December, the survey results showed.
Investment
Growth in fixed-asset investment likely slowed in the two month period, as the property market remained a drag. While the sector showed some early signs of stabilization with home sales growing and prices steadying, property investment likely continued to decline at a high single digit.
Policy support from special local government bond issuance and policy banks’ special infrastructure investment funds should have continued supporting infrastructure investment. The overall fixed-asset investment growth is expected to soften to 4.5% from an increase of 5.1% for the whole of 2022.
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