China’s consumer spending rose again in the first two months of 2023, an early sign of an economic recovery that the government warned remained fragile after years of pandemic restrictions.
Retail sales rose 3.5 percent annually in the first two months of 2023, compared with a decline in the previous three months.
The data, part of a comprehensive overview of activity since Beijing ended sweeping pandemic restrictions, showed a mixed picture of the economy, with recovery momentum threatened by global demand for China’s exports and a slow-moving property sector.
China’s National Bureau of Statistics warned in a statement that the foundations of economic recovery were “not yet solid” and said the government would take measures to boost domestic consumption.
Chinese policymakers last week set an economic growth target of 5 percent for 2023, an unambitious figure that analysts suggest could be designed to miss expectations. China’s economy will only grow by 3 percent in 2022.
Meeting those targets is still “not an easy task”, new premier Li Qiang warned Monday as he closed China’s annual rubber-stamp parliament, as the country emerges from the pandemic economy.
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Retail sales data, which was in line with expectations, was closely watched due to the impact on consumption of China’s zero-Covid lockdown system and mass testing. Retail sales fell across the board in 2020 and 2022 – the first annual decline since the late 1960s.
“We’ve always felt that the recovery will be consumer-led, and I think it’s starting to take off,” said Louise Loo, head of China economics at Oxford Economics, adding that momentum was picking up, but still there. relatively weak.
“Recovery has started in earnest, but it’s not the reopening push that people were hoping for,” he said.
China’s reopening began in December last year and has taken place gradually against the backdrop of the national outbreak, with the government ending entry quarantine rules in January and only this week allowing foreign tourists to re-enter the country.
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Other data for the first two months of the year are mixed. Fixed asset investment increased by 5.5 percent compared to the previous year, exceeding expectations. Industrial output, the driver of growth in the early stages of the pandemic, increased by 2.4 percent annually. The city’s unemployment was slightly higher at 5.6 percent.
“Compared to other countries after the pandemic, the recovery in China is relatively weak,” said Ting Lu, chief China economist at Nomura.
Even in the positive retail sales data, various components showed an uneven recovery. Lu pointed to a 9.4 percent year-on-year contraction of cars in January and February, compared with 4.6 percent growth in December.
He said that further weakness will weigh on the recovery but forecast better retail sales figures in March due to concerns that China’s wave of Covid infections should January data.
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Real estate activity shows some signs of a positive trajectory, even compared to the low base figures of last year as the liquidity crisis gripped major property developers.
NBS said overall investment in real estate development declined 5.7 percent annually in January and February – a slower pace than the Decline in December. Manufacturing and infrastructure investment increased by 8.1 and 9 percent, respectively.