Figures for Chinese retail sales indicate that government efforts to stimulate domestic demand are having some success, even as exports continue to plunge and industry struggles to keep production going, analysts said.
The latest round of statistics released Thursday continue to paint a picture of an economy trying to regain its footing as the impact of the global downturn slams its industrial sector.
The full impact of the downturn is difficult to assess, for two reasons. For one thing, some of the statistics being released this week are only for the first two months of the year and are not broken down by month. For another, year-on-year comparisons are problematic, as the Lunar New Year holiday, which causes major shifts in consumption and industrial activity each year, fell two weeks earlier this year than in 2008.
China's retail sales grew 15.2 percent in the first two months to 2 trillion yuan (293.8 billion U.S. dollars), the National Bureau of Statistics (NBS) said Thursday.
The figure, although lower than the 20-percent-plus increase a year earlier, was encouraging, analysts said.
Retail sales growth in January and February was equal to or even higher than last year adjusted for inflation, said Zhuang Jian, senior economist with Asian Development Bank.
The consumer price index (CPI), a major gauge of inflation, hit a 12-year high of 8.7 percent in February 2008 but fell 1.6 percent in the same month this year.
"Domestic consumption has remained stable so far, despite the economic slowdown," he added.
In January and February, urban retail sales rose 14.4 percent to 1.35 trillion yuan, while rural sales increased 17 percent to 653.9 billion yuan, according to the NBS.
Wholesale and retail sales rose 14.8 percent to 1.68 trillion yuan. Catering and hotel activity was up 18.9 percent to 301.6 billion yuan.
Xu Lianzhong, an economist with the National Development and Reform Committee (NDRC), said rising retail sales reflected the impact of the government stimulus plan, which aimed to maintain 8-percent economic growth by buoying domestic spending.
Another factor was the Spring Festival, which began in January. This long annual holiday is a major shopping period in China.
However, he warned that the strength in retail sales wouldn't persist the rest of the year as income growth slackened amid the economic downturn.
Zuo Xiaolei, chief economist with Galaxy Securities, expressed optimism about consumption, saying retail sales were likely to keep growing at the January-February pace.
Zuo suggested the government initiate do more to stimulate consumption, not just large-scale investment. "Government spending alone is not enough to push the economy forward."
INDUSTRIAL OUTPUT STILL WEAK
Although retail sales growth was relatively stable, industrial output increased only 3.8 percent in the first two months this year, a much slower growth pace from a year earlier when it was 15.4 percent.
Zhuang said weak global demand was the main cause of the slowdown in industrial production growth.
The General Administration of Customs said Wednesday that exports sank 25.7 percent year-on-year in February, the largest decline in more than a decade. Exports contracted for the fourth month in a row to 64.90 billion U.S. dollars.
The impact of weaker exports on industrial production so far this year is somewhat difficult to determine. The government did not release the January industrial output figure separately from the two-month total. In February, it said, industrial output rose 11 percent.
That was the first double-digit monthly gain since October, the NBS said.
Year-on-year figures for all Chinese statistics have been affected by the shift in the Lunar New Year, which came two weeks earlier this year than in 2008.
"Statistics of industrial output last month signaled a good start of this year's production," Zuo Xiaolei with Galaxy Securities told Xinhua.
It reflected the impact of the stimulus package on economic growth, she said.
Industrial power use climbed 1.8 percent year-on-year in February to 217.3 billion kilowatt-hours, compared with a 7.2 percent drop in the first two months combined.
Auto production rose 22.9 percent from a year earlier to 853,000 units in February, more than half of the two-month total.
In February, cement output showed a 42.5 percent year-on-year increase. Coal and steel production rose 16 percent and 8.3 percent, respectively. In all these cases, only February and two-month figures were released.
LOOK FOR DOMESTIC GROWTH
Apart from retail sales and industrial output, other economic data released so far this week, such as urban fixed asset investment and bank credit, also indicated to some economists that economic conditions might be improving.
Urban fixed asset investment rose 26.5 percent year-on-year to 1.027 trillion yuan in the first two months of 2009, mainly spurred by the 4-trillion yuan spending plan announced by the government in late 2008.
The pace of growth was higher than the same period in 2008, when urban fixed asset investment expanded 24.3 percent. It was also higher than the 26.1 percent annual growth last year.
In the case of fixed asset investment, only a two-month total was given, with no breakout for either January or February.
At the same time, bank credit continued to expand in February, with Renminbi loans totaling 1.07 trillion yuan. It was the second straight month that new yuan-denominated loans exceeded 1 trillion yuan, according the People's Bank of China, the central bank.
Loans approximately doubled in January to about 1.6 trillion yuan.
Faced with continuing export declines as external demand ebbed, China would have to depend more on domestic demand and investment for economic growth, according to Zhuang.
"We can tell from the data on investment and consumption that industrial production would gradually recover in the coming months. An increase in spending will lift heavy industry, while strong consumption will benefit light industry," he said.
The effect of policies to encourage lending, expand investment and stimulate domestic demand through tax and interest-rate cuts would become more evident as the year progressed, said Xu.
(Xinhua News Agency March 12, 2009)