Chinese economic activity picks up at the end of 2019, but headwinds remain

Economic activity in China at the end of 2019 execeded forecasts, but some economists said that it was too soon to sound the 'all clear'.

Gross domestic product in the world's third-largest economy behind the US and Eurozone expanded at a year-on-year pace of 6.0% over the three months ending in December, as expected.

But more timely data for industrial production, fixed asset investment and retail sales all came in ahead of forecasts.

That was especially true of factory output, which according to China's National Bureau of Staistics, accelerated from a year-on-year pace of 6.2% for November to 6.9% in December, easily outpacing forecasts for a rise of 5.9%.

Over the year to November meanwhile, fixed asset investment was 5.4% higher (consensus: 5.2%) while retail sales were up by 8.0% in nominal terms, maintaining the same pace as in the month before (consensus: 7.9%).

The data on investment implied that capital spending rose at a year-on-year clip of 7.3% last month, versus 5.2% in November, said Julian Evans-Pritchard at Capital Economics.

And in real, or inflation-adjusted, terms, the pace of retail sales picked up from 4.9% to 6.0%.

"External headwinds should ease further in the coming quarters thanks to the “Phase One” trade deal and a recovery in global growth," Evans-Pritchard added.

"But we think this will be offset by a renewed slowdown in domestic demand, triggering further monetary easing by the People’s Bank.