China economy shows muted growth during holiday period
CHINA’S economy showed a few signs of improvement in January as the country charted a path through its second month without Covid Zero curbs, though a major holiday season kept a lid on some activity.
Bloomberg’s aggregate index of eight early indicators showed a slight uptick in activity in January. That compared with a contraction in December as the economy slowed in response to a massive Covid-19 outbreak.
January marked the first time that Chinese people were able to travel during the Lunar New Year holiday period without major restrictions since the pandemic began.
Early signs showed a rise in activity as more than 300 million trips were made during the holiday, nearly 90 percent of prepandemic levels, according to the Ministry of Culture and Tourism. Box office figures were higher, too, topping last year’s holiday.
Restaurant revenue spiked nearly 25 percent during the festival period from a year ago, according to a survey from the China Cuisine Association, while major retail and catering firms saw their sales jump nearly 7 percent year-on-year, state media CCTV reported citing figures from the Ministry of Commerce.
Consumption is seen as a much-needed driving force for the world’s second-largest economy this year, particularly as the global economy cools. China’s State Council said the nation needs to accelerate its consumption recovery, CCTV reported over the weekend.
The optimism was present in major onshore stocks even before the holiday began as investors cheered the reopening and fading outbreaks. After losing momentum in December, the CSI 300 Index regained traction this month, advancing about 8 percent ahead of the holiday week compared with the end of last month. As trading resumed Monday, the benchmark equity gauge was set to enter a bull market.
“High frequency data signal spending surged during China’s first unrestrained Lunar New Year celebration since 2019. The end of Covid Zero appears to have released a flood of pent-up demand. Not all the data are positive, but most of them back our view that reopening will be rapid – and that consumer spending should provide key support to the recovery,” said Bloomberg economist David Qu.
Other indicators weren’t as positive, either as business activity slowed during the Lunar New Year season or as the global economy continued to struggle.
Confidence among small businesses was better in January than in December, with real estate, transport, accommodation and catering activity seeing a sharp rebound, according to Standard Chartered Plc.
Even so, the index measuring that confidence fell just short of expansion, Standard Chartered economists Hunter Chan and Ding Shuang wrote in a note this month. They added that a sub-index measuring manufacturing activity retreated “partly due to holiday effect.”
Car and home sales fell in the first weeks of the month. Additional data from China Real Estate Information Corp., which tracks 40 major cities, showed that residential sales by area declined 14 percent from a year earlier during the week that included the holiday, suggesting the sector remains a concern.
Factory-gate prices, meanwhile, remained in deflation—though not as deeply as in November and December.
Early trade data from South Korea showed the global economy is continuing to struggle, with exports falling 2.7 percent in the first 20 days of the month. While the headline number was better than December’s 8.8 percent fall, there were some concerning aspects.
Shipments to China fell 24.4 percent in the period, underscoring how long the road ahead is for the recovery of the world’s second-largest economy, even after it scrapped restrictions.
While economists have been upgrading their gross domestic product forecasts for 2023, they’ve also warned that disruptions and the Lunar New Year holiday will likely weigh on the first quarter before the rebound takes hold.