China industrial output and retail sales beat forecasts early in 2026

Monday 16 March 2026 - 11:50

By: Dakir Madiha

China industrial output and retail sales beat forecasts early in 2026

China’s economy started 2026 stronger than expected, with industrial production and retail sales both exceeding forecasts in the January to February period, according to data released Monday by the National Bureau of Statistics.

Industrial output rose 6.3 percent year on year during the first two months of the year, accelerating from the 5.2 percent growth recorded in December and surpassing the 5 percent increase forecast in a Reuters survey. Retail sales grew 2.8 percent, above expectations for a 2.5 percent rise, supported by consumer spending during the extended Lunar New Year holiday in mid February.

Fixed asset investment also surprised on the upside. It increased 1.8 percent compared with a year earlier, reversing earlier declines and significantly outperforming expectations for a 2.1 percent contraction.

Consumer spending during the nine day Lunar New Year break helped boost activity in several sectors. Travel related spending increased sharply, including purchases of airline tickets, car rentals and hotel accommodation. Core inflation, which excludes food and energy, rose 1.8 percent year on year in February, reaching its highest level in several months and reflecting stronger demand during the holiday period.

Despite the improvement, consumption growth remains slower than a year earlier. Retail sales expanded 4 percent during the same January to February period in 2025, highlighting the continued drag from weak household confidence and the prolonged property downturn.

Property investment continued to decline during the first two months of the year, falling about 11 percent from a year earlier. However, the drop represents an improvement compared with the 17.2 percent decline recorded across the whole of 2025.

The industrial data pointed to continued resilience in China’s manufacturing sector, supported by solid export demand. Separate trade figures released earlier in March showed China’s foreign trade increased 18.3 percent year on year during the January to February period. Reuters reported that strong demand for electronics contributed to a surge in exports, keeping the economy on track to extend last year’s record trade surplus of about 1.2 trillion dollars.

Labor market indicators showed some signs of pressure. The surveyed urban unemployment rate rose to 5.3 percent during the January to February period, up from 5.1 percent in December. The government has set a target unemployment rate of around 5.5 percent and aims to create more than 12 million new urban jobs in 2026.

The data were released shortly after China’s annual parliamentary session, where Premier Li Qiang announced an economic growth target of between 4.5 percent and 5 percent for 2026. The goal marks the lowest official target in more than three decades and is slightly below last year’s target of 5 percent.

Authorities pledged to strengthen fiscal and monetary support to boost domestic demand. The government plans to maintain the fiscal deficit at 4 percent of gross domestic product and allocate 250 billion yuan to a consumer goods replacement program aimed at stimulating spending.

A private sector survey conducted by S&P Global earlier this month showed China’s CRatingDog manufacturing purchasing managers index rose to 52.1 in February, its highest level in more than five years. However, the National Bureau of Statistics cautioned that the foundations for a sustained economic recovery remain fragile.