Economy consolidates as factory, retail activity soars

China’s factory and retail sector activity surged in the first two months of the year, beating expectations, as the economy consolidated its brisk recovery from the coronavirus paralysis of early 2020.

While the impressive set of numbers released on Monday were skewed by the very low base from last year’s massive slump, analysts said they nonetheless showed China’s strong rebound remained intact.

Industrial output rose 35.1 percent in the first two months from a year earlier, up from a 7.3 percent on-year uptick seen in December, data from the National Bureau of Statistics showed, stronger than a median forecast for a 30 percent surge in a Reuters poll of analysts.

Retail sales increased 33.8 percent, also faster than a forecast 32 percent rise and marking a significant jump from 4.6 percent growth in December and a 20.5 percent contraction for January-February of 2020.

The catering industry reported a 68.9 percent increase in revenue, as the hardest-hit sector continued to recover from the COVID-19 impacts.

“We have a positive outlook for exports and manufacturing investment this year,” said Louis Kuijs, head of Asia economics at Oxford Economics. “And we expect household consumption to become a key driver of growth from Q2 onwards as confidence improves and the government’s call to reduce travel is toned down.”

China’s ability to contain the coronavirus pandemic before other major economies were able to do so has allowed it to rebound faster. In 2020, it was the only major economy to report positive annual growth, with an expansion of 2.3 percent. The recovery has been driven by robust trade, pent-up demand and government stimulus.

China’s economic activity is normally distorted in the first two months because of the week-long Lunar New Year holiday, which fell in February in 2021.

Despite the statistical noise in the latest data, other measures show a broad-based recovery with industrial output up 16.9 percent and retail sales growing 6.4 percent compared with the first two months of 2019. “After removing the base effect, the growth of main indicators is stable and macro indicators are in a reasonable range,” said the NBS.

Industrial production also picked up as many Chinese people opted to stay put during the Spring Festival holiday, in response to the government’s call to avoid unnecessary gatherings as part of anti-epidemic measures, according to NBS spokesperson Liu Aihua.

However, Liu warned that while positive factors for China’s economy are increasing, the foundation for the recovery is not yet solid.

“COVID-19 is still spreading around the world and global economic conditions are complex and severe; domestically the imbalances of the recovery are still quite obvious,” Liu said.

Surveyed urban unemployment reversed a steady decline and rose to 5.5 percent in February from 5.2 percent in December, indicating increasing pressure on China’s job market. Fixed asset investment increased 35 percent in the first two months from the same period a year earlier, slower than a forecast 40 percent jump.