It’s an afterthought amid a mideast melee that’s poised to dominate every headline for a third week running, but it’s worth noting that the world’s second-largest economy steadied during the first two months of 2026.

That’s according to Xi Jinping’s number-crunching apparatchiks, and if you can’t trust them, who can you trust? (I joke, but Beijing’s National Bureau of Statistics is probably at least as reliable as Washington’s tarnished BLS these days.)

The January-February rollup, released on Monday, showed industrial production rose more than 6% YoY, a decent outcome that underscored the message from an anomalous 21.8% jump in exports during the first two months of the year. (I wouldn’t put a lot of stock in that latter statistic, which is why I didn’t mention it last week.)

Retail sales, meanwhile, managed a 2.8% gain for January-February. That was better than expected, but still tepid.

The persistent disparity between industrial output and retail sales growth is an enduring testament to the intractability of China’s domestic demand downturn.

Xi’s shown himself to be mostly ineffectual at resuscitating consumer spending following the pandemic and a series of crackdowns (e.g., curbs on property speculation and the anti-monopoly crusade, which doubled as a social engineering project).

CPI figures for February — a month impacted by the Lunar New Year festival — showed a welcome pickup in both headline and core inflation, which ran 1.3% and 1.8%, respectively, last month. That latter figure marked the quickest pace in nearly half a dozen years.

Although factory gate prices spent a — checks notes — 41st consecutive month in deflation, the depth of the malaise moderated to -0.9%.

As elsewhere, monetary policymakers in China will be compelled to incorporate sharply higher crude prices into their decision-making calculus in the event oil were to sustain triple-digits for any appreciable length of time.

China imports more oil than any other nation on Earth and it’s the main buyer of Iranian cargoes. Higher prices could bleed into inflation, ostensibly curtailing the PBoC’s capacity (or at least willingness) to ease.

But my guess is the inflation bump in February will prove fleeting, the same for the early-year, holiday retail sales fillip. And that core price growth (excluding any distortion from precious metals) will decelerate anew.

The figure above’s a reminder: China just finished an 11th quarter (and a 12th in 13) in the freezer, going by the deflator implicit in the nominal versus real growth figures.

Although Chinese policymakers — who’ve struggled for two years to pull the county back from the deflationary abyss — would welcome evidence of faster consumer price growth in most contexts, an oil-driven price shock is the wrong kind of inflation.

Beijing has a large crude stockpile, and the Party will do what it can to cushion the blow for Chinese consumers, but they won’t be able to blunt the pass-through completely — again assuming crude sustains recent gains.

Oh, and fixed investment showed a 1.8% gain for the first two months of the year in Monday’s figures. That’s notable. 2025 was the worst year on record for FAI, so any rebound is welcome news.