Donghai Futures Macro Data Observation: Economic Data in January-February Better Than Expected, Significant Improvement in Production and Demand

Author: Donghai Futures Analyst: Ming Daoyu

Qualification Certificate Number: F03092124

Investment Consulting License Number: Z0018827

Phone: 021-68758786

Email: mingdy@qh168.com.cn

Main Points:

• Data Highlights:

In January-February, total retail sales of consumer goods increased by 2.8% year-on-year, compared to an expected 2.5% and a previous 0.9%, rising 1.9 percentage points from the previous value. The industrial added value above designated size grew by 6.3% YoY, versus an expected 5.0% and a previous 5.2%, up 1.1 percentage points from the previous, exceeding market expectations. Fixed asset investment in January-February was 1.8%, compared to an expected -2.1% and a previous -3.8%, rising 5.6% and significantly surpassing market forecasts; among these, infrastructure investment increased by 11.4% YoY (previously -15.9%), up 27.3%; manufacturing investment rose by 3.1% YoY (previously -10.5%), up 13.6%; real estate development investment for January-February decreased by 10.3% YoY, narrowing the decline by 26.5%; commercial housing sales area decreased by 13.5%, narrowing the decline by 3.1 percentage points; sales of commercial housing increased by 20.2%, narrowing the decline by 4.0 percentage points.

• Main Points:

Overall, domestic demand economic data for January-February rebounded and exceeded market expectations, mainly due to offsetting effects of the Spring Festival shift. China’s January-February consumption increased by 2.8% YoY, industrial added value by 6.3%, and fixed asset investment by 1.8%. The data indicates a broad recovery driven by domestic demand, with supply growth further expanding; investment and consumption continue to improve significantly and outperform expectations, with industrial production accelerating in the short term. Currently, demand-side, short-term investment has rebounded sharply. Although some policies to stimulate real estate have been introduced, their impact remains limited, and the market continues to adjust; while investment growth has not improved markedly due to strict control policies, YoY decline has narrowed significantly due to low base effects. Thanks to policy tools implemented in Q4 last year, early fiscal expenditure, and accelerated government financing at the start of the year, infrastructure investment has improved substantially. Manufacturing investment has also improved with the implementation of policy financial instruments, better corporate performance, and large-scale equipment upgrades. Domestic demand for commodities has overall improved and outperformed market expectations. On the supply side, due to strong foreign demand, good exports, and industrial enterprise operation rates above seasonal levels, industrial production maintains rapid growth. In the short term, domestic commodity supply and demand are relatively weak on the demand side but still ample on the supply side; ongoing policies to combat “internal competition” and strong external demand provide some support for prices of bulk commodities. The data release significantly exceeds expectations, strengthening short-term support for prices of domestic demand-driven bulk commodities. From a policy perspective, the two sessions continue to emphasize more proactive fiscal policies and moderately easing monetary policies. Despite external uncertainties and weak domestic demand, policies are expected to accelerate implementation, with fiscal policy continuing to lead and efforts to combat “internal competition” deepening, which is beneficial for the long-term recovery of the domestic market. Overseas, although U.S. trade policies face long-term uncertainties, short-term trends are easing, with external demand remaining relatively strong; geopolitical tensions in the Middle East increase supply disruptions and energy costs. Energy prices have surged due to supply shocks; non-ferrous metals fluctuate due to rising inflation expectations and a strengthening dollar; precious metals face some downward pressure as inflation expectations rise and global central banks’ rate cut expectations weaken.

• Risk Factors: Escalating U.S.-China tensions, weaker-than-expected domestic stimulus policies, liquidity tightening exceeding expectations.

1. Both industrial and service production growth rates have rebounded

In January-February, industrial added value above designated size increased by 6.3% YoY, versus an expected 5.0% and previous 5.2%, up 1.1 percentage points, significantly higher than market expectations; month-on-month growth was 0.83%, compared to 0.49% previously, an increase of 0.34%, indicating further acceleration in industrial production. The main driver is strong external demand, with exports exceeding expectations, and high operation rates of industrial enterprises, leading to a substantial rebound in industrial growth.

Looking at three major sectors: in January-February, mining increased by 6.1% YoY, up 1.7 percentage points from last month, driven by seasonal demand recovery, limited overseas oil and gas supply, and rising costs, which accelerated mining activities like coal and oil & gas extraction. Manufacturing grew by 6.6%, up 0.9 percentage points from last month, mainly due to further recovery in foreign demand and accelerated industrial output; notable growth in electrical machinery, railways, ships, aerospace, and other transportation equipment (8.7%, 13.7%, 14.2%), and in computers, communications, and other electronic equipment. Power, heat, gas, and water supply increased by 4.7%, up 3.9 percentage points, mainly due to surge during Spring Festival. High-tech manufacturing grew by 13.1%, linked to continued high demand and prosperity in semiconductor and related industries.

Figures 1 & 2: Industrial Added Value – Monthly YoY and by Sector

Source: Donghai Futures Research Institute, iFinD

From upstream and downstream perspectives: in January-February, upstream mining increased by 6.1% YoY, up 0.7 percentage points; midstream raw material manufacturing grew by 4.3%, up 0.46 points; midstream machinery manufacturing increased by 10.4%, up 3.3 points, the largest marginal driver; downstream consumer manufacturing increased by 5.0%, up 0.7 points; other utilities and sectors grew by 4.1%, up 2.5 points.

Figures 3 & 4: Industrial Added Value – Upstream/Downstream YoY Growth and Contribution

Source: Donghai Futures Research Institute, iFinD

In services: the service production index for January-February increased by 5.2% YoY, up from 5.0%, accelerating further. Notably, information transmission, software, and IT services grew by 10.1%, though slightly down from last month; leasing and business services grew by 8.2%; finance increased by 7.0%, driven by stock market recovery; transportation, storage, postal services, accommodation, and catering grew by 6.3%, 5.4%, respectively, supported by strong domestic travel during the Spring Festival.

Figures 5 & 6: Service Industry Production Index – Monthly YoY and Breakdown

Source: Donghai Futures Research Institute, iFinD

Looking ahead to March 2026, with recovery in demand from the U.S. and new economies, and steady domestic demand, overall industrial growth is expected to remain high; service sector growth will be further supported by policies promoting service consumption.

2. Domestic consumption growth YoY has rebounded and exceeded expectations

In January-February 2026, total retail sales of consumer goods reached 86,079 billion yuan, up 2.8% YoY, versus an expected 2.5% and previous 0.9%, accelerating by 1.9 percentage points from December last year. Excluding automobiles, retail sales were 79,827 billion yuan, up 3.7%.

In daily consumption: catering sales increased by 4.8%, outpacing retail growth; consumption of food, beverages, tobacco, alcohol, and clothing rebounded significantly, possibly due to the Spring Festival shift; cosmetics and jewelry grew by 4.5% and 13%, respectively, maintaining high growth. Durable goods demand, after initial release, is expected to slow due to high base effects and the high baseline of categories like automobiles last year, constraining overall growth; related categories such as home appliances, furniture, communication devices, and building materials saw retail increases of 3.3%, 8.8%, 17.8%, but declines in automobiles and communication devices (-7.3%, -2.2%) indicate overall slowdown. Oil and related products declined by 9.7%, mainly due to falling oil prices.

In service consumption: retail sales of services increased by 5.6% YoY, slightly faster than the previous year’s 5.5%. Notably, telecom, tourism, and leisure services saw rapid growth, supported by policies promoting service consumption and their effective implementation.

In the short term, policies encouraging old-for-new replacement for consumer goods are weakening; durable goods consumption growth is expected to remain weak, with high base effects in the first half of 2025 likely to keep growth low. In the second half, as base effects diminish, policies supporting service consumption take effect, and household wealth effects rebound, overall consumption is expected to continue recovering.

Figures 7 & 8: Retail Sales of Consumer Goods – YoY and Breakdown

Source: Donghai Futures Research Institute, iFinD

3. Fixed asset investment growth has sharply rebounded

In January-February, total fixed asset investment (excluding rural households) was 52,721 billion yuan, up 1.8% YoY, versus an expected -2.1% and previous -3.8%, rising 5.6%, surpassing market expectations. Private fixed asset investment declined by 2.6%. Month-on-month, February fixed asset investment increased by 0.39%, indicating an acceleration.

Real estate sales decline narrows but remains weak. Investment in real estate development decreased by 10.3%, narrowing by 26.5%; sales area fell by 13.5%, narrowing by 3.1 percentage points; sales amount declined by 20.2%, narrowing by 4.0 points. This is mainly due to the high base effect from the “September 24 real estate policy” last year. Although new policies to support real estate are being introduced, their impact remains limited; transaction activity has slightly improved but remains subdued. Funding sources for real estate: in January-February, funding decreased by 16.2%, narrowing by 11.8 points; new construction area fell by 23.1%; total construction area declined by 11.7%; completed area decreased by 27.9%. Overall, the real estate market continues to adjust with low activity, though some support policies may provide limited stabilization.

Figures 9 & 10: Real Estate Investment and Sales Data

Source: Donghai Futures Research Institute, iFinD

Infrastructure investment saw significant improvement. In January-February, infrastructure investment (excluding power) increased by 11.4%, up from -15.9%, with a 27.3% rise. This was driven by the rollout of 500 billion yuan in policy financial tools since December, issuance of local government special bonds, and front-loaded fiscal spending, leading to faster infrastructure expenditure. The high base from last year’s fiscal stimulus, combined with accelerated government bond financing (23800 billion yuan in January-February, roughly flat YoY but with a significant month-on-month increase), and the offset of the Spring Festival shift, contributed to the sharp rebound.

Figures 11 & 12: Infrastructure Investment YoY and Government Bond Financing

Source: Donghai Futures Research Institute, iFinD

Manufacturing investment rebounded sharply. In January-February, manufacturing investment increased by 3.1% YoY, up from -10.5%, a 13.6% rise. Although still lower than last year’s 9.0%, the improvement reflects better investment willingness, supported by the BCI index at 59.8 and financing environment at 48.7, both improving from previous months. High-tech industries like specialized equipment, automotive, computing, and communications continue to grow rapidly, though some overcapacity and “internal competition” policies dampen investment willingness. Large-scale equipment upgrades and policies to phase out outdated capacity support manufacturing investment. Looking ahead, implementation of “internal competition” policies, profit improvements, and ongoing equipment upgrades are expected to support further growth, though geopolitical risks and U.S. trade uncertainties may limit short-term rebound strength.

Figures 13 & 14: Manufacturing Investment YoY and Business Climate & Financing Indices

Source: Donghai Futures Research Institute, iFinD

4. Impact on bulk commodities

Currently, demand-side: short-term investment has rebounded significantly. Although policies to stimulate real estate are limited, the market continues to adjust; investment growth has narrowed YoY due to low base effects. Thanks to policy tools and fiscal expenditure, infrastructure and manufacturing investments have improved, boosting domestic commodity demand beyond expectations. On the supply side, strong foreign demand, good exports, and industrial operation rates above seasonal levels support rapid industrial growth. In the short term, domestic supply and demand are relatively weak on the demand side but ample on the supply side; ongoing policies to curb “internal competition” and strong external demand provide some price support for bulk commodities. The recent data release exceeds expectations, strengthening short-term support for prices of demand-driven bulk commodities. From a policy perspective, the two sessions continue to emphasize proactive fiscal and moderately easing monetary policies. Despite external uncertainties and weak internal demand, policies are expected to accelerate, with fiscal support and “internal competition” efforts deepening, which benefits long-term market recovery. Overseas, U.S. trade policy remains uncertain but shows signs of easing short-term; external demand remains strong, while geopolitical tensions in the Middle East disrupt supply and push energy costs higher. Energy prices have surged due to supply shocks; non-ferrous metals fluctuate with inflation expectations and a stronger dollar; precious metals face downward pressure as inflation expectations rise and global rate cut expectations weaken.

Important Disclaimer

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