BEIJING (Reuters) – China’s factory output unexpectedly picked up pace in the first two months of the year while retail sales beat expectations, even though the country is grappling with a surge in COVID-19 cases, a property market downturn and heightened global uncertainties.
Industrial output 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, official data showed on Tuesday. That compared with a 3.9% surge in a Reuters poll.
Retail sales in January-February grew 6.7% year-on-year amid rising demand during the Lunar New Year holidays, having increased 1.7% in December. The figure – also the quickest since June 2021 – beat expectations of a 3.0% increase in the poll.
Fixed asset investment rose 12.2% on year compared with the 5.0% increase tipped by the Reuters poll and 4.9% growth in 2021. The figure was the highest since July last year.
The unexpectedly strong performance of the world’s second largest economy in the new year came after China’s economy was losing momentum as a liquidity crunch in the property market and strict anti-virus measures hit consumer confidence and spending.
Premier Li Keqiang said on Friday that he is confident of hitting this year’s economic growth target of around 5.5% despite challenges including the war in Ukraine. Li also vowed to provide more policy support in the year.
China’s economic activity is normally impacted in January and February because of the week-long Lunar New Year holiday, which fell in February in 2022. Many factory workers stayed put during the holiday due to COVID control measures and kept factory floors humming.
In February, the country’s factory inflation eased to the slowest pace in eight months and consumer inflation rose 0.9%, pointing to cautious demand already hurt by strict anti-coronavirus measures.
Factory activity expanded slightly last month as new orders improved, purchasing managers’ surveys showed, pointing to some resilience in the economy.
To spur growth, the central bank lowered mortgage lending benchmark rates in January and cut its reserve requirement ratio in December, with more easing steps expected.
China’s central bank will be among state financial institutions paying some of their profits to the government this year to fund an increase in fiscal spending, the finance ministry said last week.
(Reporting by Ellen Zhang, Liangping Gao, Stella Qiu and Ryan Woo; Editing by Sam Holmes, Bernard Orr)
