China's economic report for December was cautiously optimistic due to robust industrial production performance, but retail sales lagged.
ADVERTISEMENTChina's year-on-year gross domestic product (GDP) came in at 5.2% for the fourth quarter of 2023 - above the 4.9% figure of the previous quarter, but still below consensus estimates of 5.3%.
The quarter-on-quarter GDP growth rate for Q4 2023 was 1%, as expected by analysts, but still down from 1.5% in Q3 2023.
Year-on-year industrial production for December also came in at 6.8%, beating both consensus estimates and November’s 6.6%. This was the sharpest increase since February 2022.
Manufacturing and mining boost industrial production
The uptick in fortunes for the world's second-largest economy was mainly due to increases in manufacturing, which came in at 7.1% in December, up from 6.7% in November, as well as mining, which inched up 4.7% from 3.9% in the previous month.
Utilities saw a slight drop to 7.3% in December from 9.9% in November, however oil and gas jumped to 3.5% from 1.8%.
General equipment manufacturing also saw a leap to 4.6% from 0.8% in the previous month, whereas non-ferrous metals advanced 12.9% from 10.2% in November.
Computer and communications inched lower slightly to 9.6% in December from 10.6%, however, car production stayed mostly flat at 20%. On the other hand, other transport equipment plunged more than half to 5.6% from 12.7% in the previous month.
Retail sales still slow to pick up
Year-on-year retail sales for December slid quite a bit to 7.4%, from 10.1% in November, also coming in below consensus estimates of 8%.
This was the slowest increase since September 2023 and was mainly due to communications equipment sales falling to 11% in December from 16.8% in the previous month.
Car sales also decreased to 4% from 14.7% in November, with personal care products dropping to -5.9% in December, from 3.5% in the previous month as well. Office supplies slipped to -0% from -8.2%.
On the other hand, food oil sales rose to 5.8% from 4.4% in November, with clothing sales also increasing to 26% from 22%. Gold, silver and jewellery sales almost tripled to 29.4% from 10.7% in November.
Chinese consumer sentiment remains weak
However, the overall weak retail sales performance led to the cautious optimism caused by GDP and industrial production numbers to be tamed somewhat, since the Chinese economy still seems to be struggling with weak demand.
This is largely due to the country still struggling with the near-collapse of the real estate sector, which held much of Chinese consumers’ family wealth.
A relatively high level of youth unemployment has also added to lower disposable income. Consumer shopping trends have also seen a shift, with people preferring to buy fewer, more durable and high-quality goods such as iPhones, instead of several smaller or cheaper items.
With economic growth still struggling to meet expectations, consumers and investors alike have also started losing confidence in the government and regulations. This could see a more cautious business and consumer sentiment continuing for the next few months.
