“Consumers were buoyed temporarily by festivities-related spending at this start of the year,” added Louise Loo at Oxford Economics.

China’s economy rebounds at start of 2024, but property drag continues

Huang Zichun, China economist at Capital Economics, said the decline from December was largely due to a higher base for comparison, as consumer spending surged at the start of last year thanks to China’s reopening.

Lynn Song, chief economist for Greater China at ING, said the “eat, drink and play” theme was off to a strong start, as revenue in catering, tobacco and alcohol increased.

Sales of sports and recreation goods also rose over the headline growth number, she added, while sales of communication devices and automobiles saw a solid start to the year.

Online retail sales also continued to grow faster than the headline numbers, though retail sales of housing appliances and furniture had a weak start to the year due to the weak property sector limiting demand.

3. Strong fixed-asset investment

China’s overall fixed-asset investment rose by 4.2 per cent in January and February, year on year, compared with a rise of 3 per cent in December.

Infrastructure investment continued to outperform the headline growth in the first two months of the year after rising by 6.3 per cent, while manufacturing rose to the highest level since October 2022 at 9.4 per cent, compared with a year earlier.

“By our estimates, the pace of expansion edged up in seasonally adjusted terms, mainly driven by the easing of the contraction in property investment. Manufacturing and infrastructure investment growth held up well, with the latter supported by the recent step-up in fiscal support,” added Huang at Capital Economics.

4. Exports boost industrial output

Industrial output continued to improve in the first two months of the year, rising by 7 per cent from a year earlier, compared with a rise of 6.8 per cent in December.

“After adjusting for seasonality, our calculations suggest that output growth held up well at 0.5 per cent, month on month, helped by the recent strength of exports,” Huang said.

Song at ING said the recovery was significantly stronger than expected, with the main areas of strength seen in the “computers, communications and other electronic equipment” category, while transport-equipment manufacturing also performed strongly.

5. Unemployment remains stable

China’s urban unemployment rate for January and February stood at 5.3 per cent, compared with 5.1 per cent in December.

The NBS said the youth-unemployment data for February would be released later this week.

6. ‘Underlying structural challenges remain’

China’s economy continued to show some improvement at the start of the year, said Huang at Capital Economics.

“We think this recovery will continue over the coming months thanks to the increase in policy support outlined at the National People’s Congress, but achieving the government’s target of around 5 per cent still looks challenging,” Huang said.

“We expect economic momentum to improve further in the near term, given the tailwind from policy stimulus. But this recovery may prove short-lived due to the economy’s underlying structural challenges.”

Loo at Oxford Economics said China’s activity data broadly stabilised at the start of the year, but that there were still reasons to think some of the strength could be a one-off.

“In the absence of decisive consumption-related stimulus this year, we think it would be difficult to sustain a robust consumer-spending pace this year,” she said.

Song at ING pointed to “mixed signals” from the data, as overall economic momentum remained soft in the first two months of the year.

She said real estate would remain a drag on the economy, with other investments needed to pick up the slack, while a slowdown in retail sales illustrated that it would be difficult to rely on consumption alone this year to achieve China’s 5 per cent growth target.