China’s aggregated Jan-Feb macro numbers suggest a stabilisation of the economy, but the picture is mixed.

Because of the Chinese New Year Holidays, the first two months of the year are aggregated when it comes to China’s macroeconomic data. The Jan-Feb numbers were better than expected, suggesting a stabilisation of the economy, at least on the production side. Industrial production increased 7% y-o-y, above market expectations (of 5.2%) and fixed assets investments rose 4.2% vs expectations of 3.2%, primarily driven by government infrastructure spending. Exports rose 7.1% y-o-y in Jan-Feb, although benefiting from a low 2023 base.  

However, domestic consumption remains weak with retail sales rising only 5.5% y-o-y in Jan-Feb vs 7.4% in December and housing investment posting a -9% y-o-y drop. New house prices kept falling in February – a -1.4% y-o-y decline, vs -0.7% in January, and -0.3% on a m-o-m basis.

These numbers suggest that the Chinese economy is stabilising, but the sectoral divergences seen in 2023 remain. While manufacturing is solid, and China is leading the way in certain hi-tech and green industries, domestic consumption is weak, and the property market continues to struggle – both constrained by high savings and low confidence.

Better economic numbers are likely to mean that China will stick to monetary policy rather than fiscal stimulus. Overall, and barring unforeseen events, China’s 2024 economic performance is thus far on course to look very similar to last year.