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China Economic Activity February 2024

China: Real-sector data for January–February overshoots market expectations

Industrial output increased 7.0% year on year in January–February, up from December’s 6.8% reading and beating market expectations. This was due to stronger manufacturing and utilities growth.

Also in January–February, retail sales rose 5.5% year on year, up from December’s 7.4% and above market projections. Moreover, fixed investment growth in January–February was 4.2%, up from 3.0% in January–December 2023 and once again above market expectations, driven by accelerating investment in the secondary and tertiary sectors.

However, property indicators were downbeat, with the first two months of 2024 seeing sharp year-on-year falls in property sales, property investment and floor space under construction, and ongoing declines in home prices.

On the surprising strength of retail trade, DBS analysts commented:

“The Lunar New Year holidays were marked by historical record high activities and spending. Both the number of domestic tourists and tourism revenues finally left the pandemic doldrums behind, rising well above the 2019 levels by 19% and 7%, respectively.”

On the outlook, Goldman Sachs analysts said:

“Taking stock of January-February activity data and our high-frequency trackers for early March, we believe China’s sequential growth momentum has been fairly solid in Q1 so far, especially for exports and government-led investment, although property weakness appears prolonged. We maintain our above-consensus GDP growth forecast for Q1 and full-year 2024, at 4.5% yoy and 4.8% yoy, respectively (vs. consensus: 4.3%/4.6% yoy), and believe more policy easing is still necessary to secure the ambitious around 5% growth target this year.”

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