BEIJING -- China's economy rebounded sharply in the first two months of this year from the virus-driven lockdowns and factory shutdowns of 2020, government data released Monday shows, but a monthly breakdown paints a more complicated picture.
On a year-to-year basis, industrial output jumped 35%, while retail sales grew 34% in the January-February period. But on a seasonally adjusted month-on-month basis, retail sales -- which include department stores, supermarkets and e-commerce -- dipped 1.4% in January from the previous month, marking the first drop since January 2020.
The contrast between solid production and sluggish consumer spending stems fromtravel restrictions imposed to discourage people from visiting their families around the Lunar New Year on Feb. 12. These measures depressed the usual surge in consumer spending but helped prop up industrial production as worker who had forgone travelling quickly returned to their jobs after the holiday.
Retail growth returned in February with a 0.56% rise.But it remained slower than in November and December, which saw gains of around 1.3%. Online sales remained strong, driven by shoppers cooped up at home, but physical stores struggled, especially in rural towns.
Industrial production, meanwhile, remained on a solid growth trend, with month-on-month rises of 0.7% in both January and February.
While China reined in the virus earlier than the rest of the world, it has seen a reemergence of localized outbreaks over the winter. Concerned authorities urged people to avoid participating in the annual travel rush.
Personal spending was lackluster during the Lunar New Year holiday as the government instituted travel restrictions. Beijing required repeated testing for people arriving from other parts of the country.
© Reuters
Beijing was especially cautious ahead of the National People's Congress this month. The city in late January began restricting entry from elsewhere in the country, requiring not only a PCR test before arriving, but also additional tests seven and 14 days afterward.
As part of its digital yuan pilot program, Shenzhen in early February sent 200 yuan ($31) each to 100,000 people planning to spend the holiday in the city. Shanghai and Tianjin also offered temporary subsidies to discourage travel.
A total of about 870 million trips were made on railways and public transportation over the 40-day Lunar New Year travel period, a 70% plunge from the usual 3 billion and a 40% decline from last year, when the virus was still spreading.
Beyond travel, parties and ceremonies were canceled or postponed in many areas, and some local authorities imposed limited entry into entertainment facilities.
The average length of the break taken by workers fell to 7.5 days. That is "significantly lower than in normal years," helping to support production, said Liu Aihua, spokesperson for the National Bureau of Statistics.
Demand at home and abroad has contributed as well. Production of personal computers more than doubled on the year in the first two months of 2021, a sharp increase from the 40% rise in December. Investment in fixed assets such as office buildings and factories has grown about 2.5% month on month so far this year, boosting demand for construction materials such as cement.
Authorities are starting to ease restrictions as the virus subsides, with zero regions reporting new cases among residents as of Feb. 22, according to the government. Beijing is set to lift the PCR test requirement Tuesday, and other domestic travel limitations will follow.
But while the economy will likely move back toward normality, household incomes remain cause for concern. Surveys of urban depositors by the People's Bank of China over roughly the past year show more than half of respondents trying to save rather than spend, up from the mid-40% range where the figure had hovered through 2019.
Around 1.48 million new jobs were created in urban areas in the first two months of 2021 -- an improvement over the same period of last year, but 15% fewer than in 2019. The longer it takes for employment and incomes to recover, the more reluctant people will be to open their wallets, further weighing on the consumer spending recovery.
