Chinese economic data for August surprise to the upside

That was due in part to support from government policies, which helped offset some of the drag from Covid-19 restrictions and power shortages during the recent heat wave, said Capital Economics.

Fresh home price declines had also weighed on consumer sentiment.

According to the National Bureau of Statistics, growth in retail sales, industrial production and fixed asset investment in China all surprised to the upside in August.

The annual rate of increase in the former accelerated from 2.7% in July to 5.4% (consensus: 3.2%) for August and in the case of industrial output from 3.8% to 4.2% (consensus: 3.8%).

Year-to-date fixed capital investment was up by 5.8% year-on-year (consensus: 5.5%).

Nonetheless, Julian Evans-Pritchard, senior China economist at Capital Economics, was expecting economic momentum to remain weak into 2023 due to the ongoing drag from Covid-19 restrictions in the Asian giant which it said were likely to remain in place at least until the People's Congress next March.

For September, things were already looking worse, he added, citing the "deepening" downturn in property, softer exports and recurring health restrictions.

Evans-Pritchard also noted that positive base effects had boosted both retail sales and industrial production.

He estimated that retail sales fell by 0.8% month-on-month in seasonally adjusted terms while industrial output was largely unchanged.

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