According to the latest figures from China’s National Bureau of Statistics, retail sales were up 4.6% year-on-year in August, beating the 3% predicted in a Reuters growth forecast poll.
According to CNBC calculations of the official data, sales of physical goods rose by 7.6% overall with the biggest jumps seen in cosmetics (9.7%) and communication equipment (8.5%). Growth in services sector retail sales dipped slightly at 19.4% compared to the previous month’s 20.3%.
The latest data also allays recent fears that China is sliding into deflation, with the consumer price index creeping up 0.1%. The country briefly went into deflation in July as the CPI decreased 0.3%, the first time it was hit with deflation since late 2020. Deflation indicates falling prices of goods and services, which could result in lower demand for exports among China’s consumers with implications for global suppliers of energy, raw materials, and food.
However, private sector investment declined last month reflecting lingering fears in the wake of two years of punishing policies targeting China’s biggest private firms. Fixed asset investment, private, non-state investment fell by 0.7% year-on-year, lower than the average of 0.5% for the whole year so far. The Chinese government has made continuous efforts to steady private sector jitters this year, including calling an official end to the tech crackdown, but it is taking time for these measures to have an effect.
“The key is to maintain the shape and pace of the economic recovery so that companies are willing to continue investing and residents are willing to continue consuming, forming a virtuous cycle and a balanced recovery,” Bruce Pang, chief economist and head of research for Greater China at JLL, told CNBC.
The National Bureau of Statistics said the data for August showed “marginal improvement” but warned of the remaining risks.
“The national economy showed good momentum of recovery with high-quality development making solid progress and positive factors accumulated,” the statistics bureau said in a press release. “However, we should be aware that many unstable and uncertain factors in the external environment still exist.”