Citizens buy food at a street stall in Chengdu, Sichuan Province, China, on June 22, 2021.
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China on Tuesday reported better-than-expected growth in retail sales, fixed asset investment and industrial production to start the year.
Data releases combine January and February as usual at the Chinese Statistics Bureau to avoid distortions from the Lunar New Year holiday, which can fall in either month depending on the year.
Retail sales grew 6.7% year-on-year, topping analysts polled by Reuters for 3% growth from a year ago. Furniture was the only category with retail sales down 6%. Petroleum products, gold, silver and jewelry saw the biggest increases.
Steady growth in auto sales – after declines for most of last year – helped boost retail sales, as did consumer demand near the Lunar New Year holiday and interest in Olympic-related products, said Fu Lingwei, a spokesman for the National Bureau of Statistics. Reporters at a press conference on Tuesday.
However, he noted that the recent Covid-19 outbreak is likely to restrict consumption in certain regions, the basis for a recovery in consumer spending is still not solid.
“Definitely, achieving the full-year target of 5.5% will require hard work,” Fu said in Mandarin, according to a CNBC translation.
Industrial production also outperformed, up 7.5% against expectations of 3.9% growth.
Investment in fixed assets rose 12.2%, well above expectations for a 5% increase. Within fixed asset investment, that in high-tech manufacturing saw one of the biggest increases, up 42.7%. Infrastructure investment grew 8.1%. Investment in real estate development rose 3.7%, even as the area of commercial floors sold decreased by 9.6%.
The real estate sector – which contributes about a quarter of GDP – has declined since Beijing began a crackdown on developers’ heavy reliance on debt in the past two years.
Sian Fenner, chief Asia economist at Oxford Economics, said on CNBC’s “Street Signs Asia” that she expects increased fiscal spending to boost infrastructure development, but not enough to offset the slowdown in the real estate sector. It expects the stimulus to work through the economy, enough to boost growth to the expected 4.9% this year and to nearly 5.4% next year.
The unemployment rate in cities increased to 5.5% in February compared to January, while the unemployment rate for those aged 16-24 remained much higher at 15.3%.
“The national economy continued a steady recovery, demand for production grew rapidly, jobs and prices were generally stable, new driving forces continued to develop, and high-quality development achieved new progress,” the statistics office said in a statement.
Last week, China’s central government Announced an official GDP target of “about 5.5%” for the year.
Many economists said the goal is ambitious, especially after a Re-emergence of Covid cases Factories were forced to stop production.
“Iris Pang, chief economist for Greater China at ING, said Tuesday on CNBC:Squawk Box Asia“Before releasing the data, she said she was considering a 6.8% downward revision of the GDP forecast due to the Covid situation.
The new restrictions have hit major 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 at the local level, but not so much at the national level, said NBS’s Fu.
But he cautioned that many risks to growth remain in the coming year.
“The international environment is complex and somewhat dangerous,” he said. “In particular, the military conflict between Russia and Ukraine and geopolitical tensions have caused high fluctuations in international commodity prices, and their impact on domestic production cannot be ignored.”
CNBC’s Charmaine Jacob and Chelsea Ong contributed to this report.