China Retail Sales, Industrial Production Growth Exceed Expectations

China’s retail sales and industrial production as well as fixed asset investment grew more than expected during the January to February period, signaling a strong start to the year.

Retail sales advanced 6.7 percent on a yearly basis in January to February period, data from the National Bureau of Statistics showed on Tuesday. This was bigger than the economists’ forecast of 3.0 percent but the pace of growth slowed from 12.5 percent expansion seen in December.

Industrial output logged an annual growth of 7.5 percent, which was also much better than the 3.9 percent rise expected by economists.

The statistics bureau combines the data for January and February to avoid the distortions from the Lunar New Year holiday.

Fixed asset investment advanced 12.2 percent from the last year versus the expected growth of 5.0 percent.

The urban unemployment rate rose to 5.5 percent in February. Economists had forecast the rate to remain unchanged at 5.1 percent.

“All three activity data releases were better than expectations, but the highlight for us was the strength of retail sales,” Iris Pang, an ING economist, said. This is even more notable during a period of strict people flow control during the Chinese New Year holidays.

This better-than-expected news has enabled the People’s Bank of China to hold policy rates steady.

Although activity data was stronger than anticipated, the economy looks set to come under renewed pressure over the coming months amid China’s worst COVID-19 outbreak since Wuhan, Julian Evans-Pritchard and Sheana Yue, economists at Capital Economics, said.

As such, it is only a matter of time before the PBoC resumes its rate cuts, they noted.

Earlier in the day, the central bank had kept the rate on its one-year medium-term lending facility unchanged at 2.85 percent. The bank injected a net CNY 100 billion into the banking system.

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