As the Iran war increases uncertainty for the global economy, China's new year economic indicators beat market expectations, showing a steady start. Consumption rebounded quickly due to the February holiday season, and production rose sharply year over year on the back of solid export demand. Fixed assets investment and real estate prices are also seen to have entered a recovery phase. Foreign media said this recovery would act as a buffer against the hit from the Iran war.
China's National Bureau of Statistics released key economic indicators for January–February on the 16th morning local time. According to the release, retail sales rose 2.8% from a year earlier during the period, beating market expectations of 2.5%. Retail sales, which aggregate retail revenues from e-commerce, department stores and supermarkets, are a gauge of the domestic economy. Typically, consumption tends to rise during this period because the Lunar New Year falls in February. However, compared with the 4% growth rate in overall retail sales in January–February last year, this year's growth has somewhat slowed.
Excluding automobiles, where sales fell due to reduced government subsidies, retail sales of consumer goods increased 3.7%. By type, goods rose 2.5% and dining out increased 4.8%. The statistics bureau added that "sales of daily necessities and some high-end goods grew rapidly by more than 10% each."
Industrial production, which shows manufacturing trends, rose 6.3% from a year earlier, topping the market forecast of 5%. By the three major sectors, mining increased 6.1%, manufacturing 6.6%, and production and supply of electricity, heat, gas and water 4.7%. CNBC said, "Demand was solid, particularly in Europe and Southeast Asian countries, leading to a relatively pronounced increase."
Goods imports and exports rose 18.3% from a year earlier. Exports increased 19.2% and imports rose 17.1%. In particular, trade with Belt and Road participating countries grew 20%, leading the increase. By item, exports of machinery and electronic products rose 24.3%, showing a notable gain. However, Bloomberg said, "The outlook for imports and exports ahead will depend greatly on the duration and escalation of the Iran war that began on Feb. 28."
Fixed assets investment, including real estate, increased 1.8% from a year earlier during the same period. The market had expected a 2.1% decline, but the result contrasted with that. This appears to reflect a base effect from last year, when fixed assets investment fell 3.8% year over year for the full year. Real estate development investment fell 11.1%, narrowing the decline compared with expectations (-19.3%) and the year-earlier period (-17.2%).
The decline in real estate prices slowed slightly. New home prices in 70 cities fell 0.37% in January and 0.28% in February. Prices of existing homes, where the impact of government intervention is limited, fell 0.43%, marking the smallest drop in 10 months. Earlier this month, the Chinese government emphasized the need to stabilize the real estate market, saying it would control new supply and reduce inventory. Attention is on whether the real estate market recovery will continue into March–April, the traditional peak season for the property market.
The statistics bureau said, "Key economic indicators rebounded significantly in January–February, and the economy got off to a smooth start," adding, "However, changes in the external environment and geopolitical risks continue to rise, and domestically, existing problems and new challenges remain, and some corporations are facing operational difficulties."
Hao Zhou, chief economist at Guotai Junan International in Hong Kong, said, "Although risks have increased due to geopolitical tensions and disruptions in the global energy market, including the Iran war, these figures show that China grew more solidly than expected," adding, "This will serve as a buffer against external shocks in the short term."