The beginning of China's economic recovery is modest. Children returned to school this week, and migrant workers have mostly resumed their jobs after China's biggest holiday of the year.
However, despite mainland China removing its Covid limitations in early December, preliminary data suggest that overall growth is still not firing on all cylinders. For instance, according to official loan data for January, loans to firms increased year over year while loans to consumers decreased significantly.
"The mixed data send a clear message that markets should not be too bullish about growth this year," Nomura's chief China Economist Ting Lu said. "This pattern has rich implications for different asset classes and commodity types, so closely tracking these high-frequency data is warranted," he continued.
According to Zhiwei Zhang, president, and chief economist at Pinpoint Asset Management, the "unemployment rate is still high which keeps household confidence weak." He continued, "I'd expect household confidence to improve as well in the coming months, but it will likely be a gradual process."
It was noted that new home sales were still below levels from the previous year, primarily due to declining sales in mid-sized cities, which had a negative impact on construction activity. A significantly sharper decline in medium- and long-term household loans than in short-term ones indicated a lackluster market for mortgages.
The Nomura Research, citing mid-February data, stated that city road and subway traffic is back above pre-pandemic levels in 2019. The research stated that the turnover in freight transport is still lower than it was a year ago.
Due to distortions from the Lunar New Year, China's National Bureau of Statistics does not separate data on retail sales, industrial production, or fixed asset investments for January. The Gregorian calendar's dates for the festival change every year.
Consumer prices increased by 2.1% from a year ago, which was significantly less than what economists polled by Reuters had anticipated. However, the agency revealed inflation statistics for January, which indicated weak demand.
The core consumer price index, which excludes food and energy, increased by 1% in January, returning to the same pace as June 2022. The producer price index, which tracks the cost of factory inputs, fell by 0.8% in January compared to the same month last year, exceeding the 0.5% reduction predicted by a Reuters poll.
China's yuan sank to a five-week low versus the dollar on Monday, another indicator of declining global demand, as statistics revealed that South Korea's average daily exports for the first 10 days of February declined by 14.5% after accounting for the Lunar New Year vacation.
