By Ellen Zhang and Kevin Yao
BEIJING, March 15 (Reuters) – Chinese economic activity rebounded in the first two months of 2023 as consumption and infrastructure investment fueled recovery from the pandemic disruption, despite challenges posed by weak of global demand and the persistent slowdown in the real estate sector.
China’s abandonment of COVID-19 controls by the end of 2022 has reinvigorated an $18 trillion economy that has suffered one of its lowest growth rates in nearly half a century. , and analysts expect the momentum to improve even further in the coming months.
Industrial production from January to February was 2.4% higher than a year earlier, data from the Office for National Statistics showed on Wednesday, slightly below expectations for a 2.6% increase. according to a Reuters poll. The reading accelerated from December’s 1.3% annual rise.
Retail sales in the first two months rose 3.5% from a year earlier, reversing the 1.8% annual decline recorded in December. The result was in line with analysts’ expectations and hopes of a consumption-led economic recovery as weaker global demand weakens Chinese exports.
The data follows signs of strength in February’s Purchasing Managers’ Indexes (PMIs), released on March 1.
“Overall, the data confirms what other, more timely indicators such as PMIs had previously suggested – that the easing of virus-related shocks led to a rapid improvement in economic conditions early in the year. year,” said Julian Evans. economics at Capital Economics, in a note.
The restaurant sector, vulnerable to COVID, notably benefited from the reopening, with an increase in revenues for January-February of 9.2% compared to the previous year, compared to the annual decline of 14.1% recorded in December, when widespread infections kept people at home.
“We expect Chinese growth to continue to improve in the coming months, driven primarily by the recovery in consumption and continued accommodative macroeconomic policy,” Goldman Sachs analysts said in a note.
Nomura analysts pointed out that shrinking exports and weakness in the real estate sector are holding back the recovery. According to their forecast, gross domestic product in the first quarter will be 3.6% higher than the previous year, compared to 2.9% annually in the fourth quarter.
Capital investment in the first two months was 5.5% higher than a year earlier, growing slightly faster than the annual rate of 5.1% for all of 2022.
But two of its components moved in opposite directions.
Infrastructure investment in the two months rose 9.0% from a year earlier, driven by government spending to support the economy. But real estate investment continued to fall by 5.7%, reflecting the caution of buyers and real estate developers.
To boost growth, the central bank on Wednesday increased liquidity injections for the fourth consecutive month by refinancing maturing medium-term loans, while keeping the official interest rate unchanged.
The National Bureau of Statistics releases combined data for January and February to smooth out distortions caused by the Lunar New Year holiday, which this year fell in January but in 2022 fell in February.
“The economy is gradually recovering this year, but keep in mind that the pandemic has damaged corporate and personal balance sheets for several years, and they still need time to repair,” he told reporters. Fu Linghui, BES spokesperson.
China has set a modest annual growth target of around 5% for this year, after largely missing its 2022 target.
Fu said reaching around 5% would be a challenge, “but we have to be aware that we have the conditions, the foundations and the confidence to achieve the growth target.”
In February, the urban unemployment rate based on a national survey rose to 5.6% from 5.5% in January. Fu attributed the rise to seasonal factors caused by the Lunar New Year. The unemployment rate for 16-24 year olds was 18.1% in February.
(Additional reporting by Qiaoyi Li; Editing by Bradley Perrett, Spanish editing by Jose Muñoz)