The world’s second largest economy reported shocking declines in retail sales and factory production, broadly missing market expectations.
Retail sales fell 11.1% in April from a year earlier, the China Bureau of Statistics said on Monday. That was well below the 6.1% decline forecast by a Reuters poll of economists, and also much lower than the 3.5% decline in March.
Industrial production fell 2.9% yoy last month, reversing a 5% gain in March.
Unemployment also rose to the second highest level on record.
The urban unemployment rate hit 6.1% in April, up from 5.8% in March – already a 21-month high. The only time China’s unemployment rate was higher was in February 2020.
“We believe second-quarter GDP growth is likely to turn negative,” said Zhiwei Zhang, president and chief economist of Pinpoint Asset Management, on Monday.
“The government is under increasing pressure to provide new impetus to stabilize the economy,” said Zhang.
China’s leaders are aware of the economic problems and have recently taken some steps to remedy the situation.
The People’s Bank of China on Sunday announced it would cut mortgage rates for first-time homebuyers to prop up the ailing real estate market.
Separately, the Shanghai government said the city will gradually open shops, restaurants and salons starting Monday, which will be a relief for its 25 million residents.
But “risks to the outlook are sloping to the downside as the effectiveness of policy stimulus will depend largely on the magnitude of future Covid outbreaks and lockdowns,” said Tommy Wu, senior China economist at Oxford Economics, on Monday.
“We are forecasting GDP growth of 4% this year, with a quarter-on-quarter contraction in the second quarter before returning to growth in the second half.”
– CNN’s Beijing office contributed to this report.