China’s factory output unexpectedly picked up pace in the first two months of the year while retail sales beat expectations and investment was stronger than forecast.
But crude steel production fell sharply as cuts ordered to curb emissions kicked in. Those cuts were due to expire yesterday, March 15, the end of the so-called winter heating season in China.
At the same time there was a sharp rise in new Covid cases reported on Monday to more than 3,000 across China.
The final data dump for January and February (combined due to the varying timing of the week long Lunar New Year holiday) saw a 7.5% rise in industrial output from a year earlier, the fastest pace since June 2021 and up from a 4.3% increase in December and the forecast 3.9% rise in market forecasts.
Retail sales in January-February rose 6.7% year-on-year thanks to higher demand in the Lunar New Year holidays, having edged up 1.7% in December. The figure – also the quickest jump since June 2021 – beat expectations of a 3.0% rise in market forecasts.
And fixed asset investment rose 12.2% on year compared with the 5.0% market estimate and 4.9% growth in 2021. The figure was the highest since July last year.
The surprisingly stronger than forecast at the start of the new year came after China’s economy lost momentum in late 2021 as a liquidity crunch in the property market and strict anti-virus measures hit consumer confidence and spending.
The current outbreak of Covid Omicron came too late to have any impact on the data as it only emerged in the first week of March and exploded last weekend.
News of the better-than-expected data had no impact on sliding stockmarkets in Hong Kong and China yesterday where falls of more than 2% and 3% were reported in late trading for a second day.
Investors are becoming very worried by the rising Covid Omicron infection numbers across China and the failure of the zero-elimination policy of President Xi Jinping’s administration.
The China Daily government owned newspaper reported yesterday that “The Chinese mainland on Monday reported 3,507 locally transmitted COVID-19 cases, the National Health Commission said Tuesday.”
That was nearly triple Sunday’s 1,337 cases reported by state owned media and considerably more than the more than 1,800 on Saturday.
Most were reported in the northeastern province of Jilin where the city of Changchun and its 9 million people are locked down, while the nearby city of Jilin is under strict movement restrictions but not locked down.
Dozens of cases were reported from Shandong, Tianjin, Guangdong, Fujian, Zhejiang, Liaoning, Jiangsu, Hebei, and Chongqing. The rest of the cases were reported in Shanghai, Heilongjiang, Gansu, Beijing, Guangxi, Yunnan, Guizhou, Anhui and Henan.
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Meanwhile production data from the National Bureau of Statistics showed China’s output of crude steel fell to 157.96 million tonnes from the year earlier figure of 174.99 million tonnes million tonnes as output cuts imposed late last year to reduce smog and pollution (especially during the Winter Olympics and Paralympics, kicked in.
The 157.96 million tonnes number is just above the Covid-hit 155 million tonnes produced in the first two months of 2020 when the first wave of the infection struck China.
The average monthly output for January and February was 87.5 million tonnes, down from 91.25 million in December.
The country’s coal output rose 10.3% in the first two months of 2022 from a year earlier, after Beijing encouraged miners to boost output production for the winter heating season and after Indonesia’s surprise monthly-long export ban.
China produced 686.6 million tonnes, up from 617.59 million tonnes in the same period in 2021.
But the daily output in the first two months remained lower than the record high level of 12.4 million tonnes set in December, as private-owned miners shut down for the holiday.
Power plants were also ordered to build up and maintain coal inventories equivalent to at least 15 days’ use.
Chinese production is expected to stay at a level of more than 12 million tonnes a day while the government tries maintain enough coal for Spring power needs amid surging global prices in the wake of Russia’s invasion of Ukraine and the outbreak of Covid in the major mining region of Inner Mongolia and in some coal producing northern provinces.
