China's factory output growth quickened in the first two months of 2026 while retail sales rebounded in a steady start to the year for an economy confronting multiple challenges including the fallout from US-Israeli attacks on Iran.

Industrial output rose ⁠6.3 percent a year ago, National Bureau of Statistics data showed on Monday, up from the 5.2 percent growth clocked in December.

It beat a five percent expansion forecast in a poll and marked the quickest growth since September last year.

The figures follow data showing China's exports blew past forecasts in the first two months, powered by surging AI-related technology demand that also lifted upstream manufacturing.

Retail sales, a gauge of consumption, jumped 2.8 percent, quickening from the 0.9 percent pace in December for their biggest gain since October.

The figure topped a forecast of 2.5 percent in a Bloomberg survey of economists.

The strong impetus was driven in part by ⁠the country's longest Lunar New Year holiday in February.

The festivities helped boost total tourism spending ⁠by almost 19 percent from the same holiday ⁠period last year, which was one day shorter.

But domestic tourism spending per trip dipped 0.2 percent, suggesting consumers remain cautious.

Data from earlier last week showed passenger vehicle sales at home tumbled 26 percent year-on-year ⁠in January-February, hurt by the end of a tax break and scaled-back government subsidies for electric vehicles.

China combines January and February data releases to smooth out distortions from the festival holidays, which can fall in either month.

Monday's data provided another encouraging sign for policymakers as an unexpected upturn in investment took some of the sting off the challenge of a protracted ⁠downturn in the critical property sector.

Fixed asset investment, which includes property and infrastructure investment, expanded 1.8 percent in the first two months, versus expectations for a 2.1 percent drop.

It fell 3.8 percent in 2025, the first annual drop in about three decades.

The surveyed urban unemployment rate in China stood at 5.3 percent. (Reuters/Xinhua)


Edited by Tony Sabine