High-rise residential and commercial buildings are being constructed near Dongyu Road, Qiantan, in the Pudong New Area of Shanghai, China, on March 15, 2024.
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BEIJING – China's economic data for the first two months of the year beat analysts' expectations across the board on Monday.
Retail sales rose 5.5%, better than expectations for a 5.2% increase in a Reuters poll, while industrial production increased 7%, compared with estimates of 5% growth.
Investment in fixed assets rose by 4.2%, more than analysts' expectations of 3.2%.
The unemployment rate in February for cities was 5.3%.
Online retail sales of physical goods rose 14.4% from a year earlier during the first two months of the year.
Investment in real estate fell by 9% in the first two months of the year compared to last year. Investment in infrastructure rose by 6.3% while investment in manufacturing increased by 9.4% during that period.
“We believe China’s sequential growth momentum remained strong in the first quarter despite notable variation across sectors,” Goldman Sachs analysts said in a report issued on Monday following the release of the data.
“However, to secure the ambitious growth target of ‘about 5%’ this year, further policy easing is still necessary, especially on the demand side (e.g., finance, housing, consumption).”
Despite the optimistic results, National Bureau of Statistics spokesman Liu Aihua warned that domestic demand was still insufficient.
She told reporters that real estate is still in an “adjustment” period, and that the overall economy is “in a critical period of recovery, transformation and uplift,” according to a CNBC translation of her Mandarin comments.
When asked about the unemployment rate for people aged 16 to 24, Liu said the numbers would be released a few days after the monthly press conference on economic data.
Holiday promotion
Economic numbers for January and February in China are usually combined to smooth out differences from the Lunar New Year, which can fall in either month depending on the calendar year. It is the country's largest national holiday, with factories and businesses remaining closed for at least a week.
This year, the number of domestic tourist trips and revenue during the holiday is up compared to last year as well as the pre-pandemic numbers from 2019. But Ting Lu, chief China economist at Nomura, noted that “average tourist spending per trip is still 9.5 percent lower.” %”. pre-pandemic levels in 2019.”
Retail sales have not rebounded from the pandemic as strongly as many expected, as consumers become uncertain about their future income.
“Consumers were given a temporary boost from festive spending at the start of the year. In the absence of decisive consumption-related stimulus this year, we believe it will be difficult to maintain a strong pace of consumer spending this year,” said Head of Economics at the University of Oxford. Economist Louise Lu said in a report on Monday.
The dull request
Goldman Sachs analysts said in a report on Friday that new loans in February fell short of expectations and fell from the previous month “even after adjusting for seasonality.”
“The continued weakness in real estate transactions and lower consumer sentiment may continue to impact household borrowing,” analysts said. “More monetary policy easing is needed.”
People's Bank of China Governor Pan Gongsheng said earlier this month that there was still room to reduce the reserve requirement ratio, or the amount of cash banks need to make available.
Goldman expects cuts of 25 basis points to that ratio in the second quarter of this year, as well as in the fourth quarter.
Real estate, which represents a large portion of household assets, has declined over the past few years after Beijing cracked down on developers' heavy reliance on debt for growth.
Average property prices in 70 major Chinese cities fell 4.5% in February from January on a seasonally adjusted annual basis, according to a Goldman Sachs analysis using a weighted average of official figures.
This is steeper than the 3.5% monthly decline in property prices in January, Goldman Sachs said.
“Our high-frequency tracker indicates that new home transaction volume in 30 cities fell by 53.2% [year-on-year] “In early March after adjusting to the basis of the lunar calendar,” the analysts said in their report.
Focus on manufacturing
The Chinese authorities did not reveal significant new support for the huge real estate sector during the annual parliamentary meeting that ended last week.
Instead, Beijing has emphasized the country's focus on developing manufacturing and technological capabilities.
When asked on Monday about concerns about spare capacity, Liu said China's manufacturing capacity utilization rate reached 76% in the fourth quarter, an increase of 0.2 percentage points from a year earlier.
She described efforts to increase the level of advanced manufacturing as a “strategic decision to achieve high-quality development,” noting that efforts are needed to prevent inefficient and inefficient investments in the sector.
Data earlier this month showed that China's exports for January and February rose 7.1% in US dollars, beating expectations for a 1.9% increase.
Imports rose 3.5% during that period, also exceeding a Reuters forecast for growth of 1.5%.
