A man and a child wearing breathing masks are seen on an electric vehicle in smog on November 14, 2018 in Beijing, China. Yang Kejia, China News Service | Visual China Group | Getty Images

As much as China's latest economic data indicate a slowdown in growth, a look at seasonal factors — and air pollution levels — signals the deceleration could be more significant, analysts said. Data released Thursday showed China's industrial output fell from 5.7 percent in December to 5.3 percent in January and February. That was the slowest pace in 17 years, according to Reuters. Fixed-asset investment rose 6.1 percent and retail sales increased 8.2 percent, both mildly beating the expectations of analysts polled by Reuters. Economic reports for the year's first two months are often lumped together in China to account for the Lunar New Year holiday, which typically takes place in early February. As people visit family and friends, the nationwide business shutdown can dampen economic activity. This year, there may be other factors at play. "Due to the anti-pollution campaign in November 2017 and March 2018, activity data in January-February this year may have been inflated due (to) a low base," Ting Lu, chief China economist at Nomura, and his team said in a Thursday report.

The Chinese government is in the middle of a multi-year effort to reduce air pollution, which has enveloped major cities in unhealthy smog, especially during the winter months. However, cutting the amount of hazardous particles in the air requires less reliance on coal-burning factories, which could have a negative impact on economic growth in the short term. Anecdotally, in the southeastern part of China around Shanghai and Hangzhou, skies have been gloomy for much of the beginning of the year. "The Chinese government is seriously concerned about unemployment (first and foremost) and GDP growth,“ Junheng Li, founder of China-focused equity research firm JL Warren Capital, said in a note on Jan. 19. "We have witnessed first-hand that many factories that had shut down previously have now been reopened in the greater Shanghai metropolis, producing severe smog in the city almost daily — far worse than last year." In the north, Reuters analysis also found that "only six of 39 smog-prone northern Chinese cities have managed to cut concentrations of hazardous airborne particles known as PM2.5 during the latest winter anti-smog campaign beginning last October." The report said average concentrations of PM2.5 rose 13 percent over the period, and cited a government official last week as saying that, while weather was partly a factor, some localities wanted "a rest after years of hardship."

Slower growth ahead