Chinese factory output slowed to its weakest pace on record early this year, a sign that the economy remained under pressure from US tariffs and weaker domestic demand despite a series of economic stimulus measures in recent months. Monthly data released on Thursday offer the clearest glimpse of how the world’s second-largest economy has performed in the early months of this year. China’s statistics bureau does not publish January-only activity data. Instead, it groups January and February together to remove distortions resulting from the timing of the lunar new year holiday, which is different each year.

Factory output, a gauge of the country’s crucial manufacturing sector, rose by  5.3 per cent year-on-year in the period compared to a 5.7 percent rise in December. That is effectively the weakest reading since that data series begins in 1995. Though January 2001was technically weaker, at that time the statistics bureau published monthly data for January and February separately, suggesting that the figure reflected lunar new year distortions.

US tariffs are likely partially responsible for weak factory output. Trade data released last week showed Chinese exports declining by the most in three years.  “Due to the trade friction, a lot of factories rushed to handle imports and exports before the lunar new year. Now they’re mostly incautious observation mode as they wait to see if the tariffs will be lifted,” said Lin Longpeng, chief market analyst at Guotai Junan Securities in Shenzhen.

Chinese stocks fells on the news, with the CSI 300 of major listed companies in Shanghai and Shenzhen down 0.7 percent by mid-afternoon.  Other data released on Thursday showed a slightly more upbeat picture. Retail sales, a gauge of household consumption, rose on­ year by 8.2 percent in January and February, unchanged from December and slightly higher than the consensus forecast of 8.1 percent, according to a Reuters poll.

Analysts cited income tax cuts, which took effect at the start of the year, as a reason for stronger consumption.  Fixed-asset investment – which tracks spending on housing, factories, machinery and  public infrastructure –   rose by 6.1 percent in the year through February, up from 5.9 percent in January and ahead of forecasts of 6 percent.