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Covid lockdowns weigh on retail and industrial production data

The ongoing spread of Covid and resulting stay-at-home orders – mainly in Shanghai – forced factories to close or work at limited capacity in April. Pictured here on May 12 is a refrigerator factory in Hefei, China, about a five-hour drive from Shanghai.

Xie Chen | Visual China Group | Getty Images

BEIJING — China reported a decline in retail sales and industrial production in April — much worse than analysts expected.

Retail sales in April fell 11.1% year-on-year, more than the 6.1% decline predicted in a Reuters poll.

Industrial production fell 2.9% yoy in April, against expectations for a modest 0.4% increase.

Over the past month, the continued spread of Covid and resulting stay-at-home orders – mainly in Shanghai – have forced factories to close or operate at limited capacity.

The “increasingly grim and complex international environment and the greater shock of [the] The Covid-19 pandemic at home has evidently exceeded expectations, new downward pressures on the economy continued to mount,” the statistics office said in a statement. The office said the impact of Covid was temporary and the economy “is expected to stabilize and recover. “

Fixed investment rose 6.8% year-on-year in the first four months of the year, slightly missing expectations of 7% growth. Investments in real estate fell by 2.7%, while investments in manufacturing rose by 12.2% and infrastructure by 6.5%.

China’s passenger car production fell 41.1% year on year in April, according to the China Passenger Car Association. The auto sector in China accounts for about a sixth of jobs and around 10% of retail sales, according to official 2018 figures from the Ministry of Commerce.

The unemployment rate in China’s 31 largest cities climbed to a new high of 6.7% in April, according to data dating back at least to 2018.

The urban unemployment rate rose 0.3 percentage points from March to 6.1% in April. The unemployment rate among 16 to 24 year olds was almost three times as high at 18.2%.

For an added sense of the extent of the economic slowdown in April, other data showed a collapse in credit demand from businesses and households.

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Total social financing — a broad measure of credit and liquidity — roughly halved last month from a year earlier to 910.2 billion yuan ($134.07 billion), the People’s Bank of China said late Friday.

But Larry Hu, Macquarie’s chief China economist, said he expected the drop in credit demand to be short-lived. He pointed out that the central government took its “first action… to save property” on Sunday by cutting mortgage rates for first-time homebuyers.

The interest rate, which used to track the benchmark five-year lending rate, is now 20 basis points below.

“Today’s cut is far from enough to transform the real estate sector, but more easing for the real estate sector would come,” Hu said in a note on Sunday.

Real estate and related industries account for about a quarter of China’s GDP, according to Moody’s.

This is an evolving story. Please check back for updates.

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