China has reported the fastest monthly expansion of industrial output in almost two years of 6.6% in November, while retail sales grew 10.1%, as the world’s second-largest economy looks to continue its patchy recovery from the pandemic.
The People's Bank of China (PBoC) also announced no change to rates, in line with market expectations, while injecting RMB 1.45 trillion of funds, which was well ahead of market expectations.
According to the latest figures released by the National Bureau of Statistics, November's industrial output surpassed the 5.6% consensus forecast and was up from October's 4.6% rise.
On the retail front, November sales growth was up from October's 7.6% rise and the quickest pace since May but short of an anticipated 12.5% surge.
Analysts had projected a more significant increase, given the low base effect from 2022 when China grappled with stringent zero-Covid policies.
A year ago, China was still being ravaged by the effects of its zero-Covid exit strategy, which provides a low base for comparison.
"China’s economy remains at a low ebb, despite headline improvement in industrial output," said Duncan Wrigley, chief China economist at Pantheon Macroeconomics.
He said the headline rise in industrial output growth was due to base effects and utilities output, with manufacturing output pretty steady.
Retail sales growth was disappointing, he said, indicating fading consumption demand as winter approaches.
Fixed asset investment data was "steady", though, he said, "buttressed by policy-supported manufacturing and infrastructure investment, though dire residential construction figures showed a tiny improvement, thanks to rising completions".
New home price declines were also steady, he noted, but existing home price falls are steepening, in a sign of market adjustment.
On the PBoC, he said it "probably means the Bank has decided to provide funding to accommodate rapid government bond issuance via MLF [medium-term lending facility] rather than an RRR [reserve requirement ratio] cut", providing a "somewhat lesser signalling effect to the market".
He added: "Falling global yields mean China theoretically has more room to ease monetary policy, but the impact of rate cuts would be limited given the troubled property sector. The CEWC [Central Economic Work Conference] confirms that policymakers have prioritised restructuring the economy towards high-end manufacturing and innovation, and away from debt-heavy sectors like property. The property sector is showing marginal improvement and indications are that policy will continue to be be stepped up only incrementally, notably on the developer funding side. This means private consumption is likely to remain fairly sluggish in H1, and China will continue to issue dollops of fiscal support to prop up activity."
Source: Oliver Haill, Proactive Investors