Covid’s continued proliferation and final orders to stay at home – primarily in Shanghai – forced factories to close or operate at limited capacity in April. Pictured is a May 12 refrigerator factory in Hefei, China, about a five-hour drive from Shanghai.
Xie Chen | Visual China Group | Getty Images
BEIJING – China reported a drop in retail sales and industrial production in April – much worse than analysts had expected.
Retail sales in April fell 11.1% year-on-year, more than the 6.1% decline forecast in a Reuters poll.
Industrial production in April decreased by 2.9% compared to the same period last year, in contrast to expectations of slight growth of 0.4%. The production of mining and communal enterprises has grown.
But production fell 4.6%, largely due to a downturn in the automotive sector and equipment production, said Bureau of Statistics spokesman Fu Linghui. Apart from Covid, he said that industrial production is facing pressure due to insufficient market demand, rising costs and other factors.
Last month, Covid’s steady proliferation and, as a result, home stay orders – primarily in Shanghai – forced factories to close or operate with limited capacity.
“The international situation is getting gloomier and more complicated and more shocking [the] The Covid-19 pandemic at home has clearly exceeded expectations, with new downward pressures on the economy continuing to grow, “the statistics bureau said in a statement. “
Fixed capital investment in the first four months of the year grew by 6.8% over the same period last year, slightly offset by expectations of growth of 7%. Investments in real estate decreased by 2.7%, in production – by 12.2%, in infrastructure – by 6.5%.
According to the China Automobile Association, China’s car production in April fell 41.1% year-on-year. According to official data from the Ministry of Commerce for 2018, the automotive sector in China accounts for about one-sixth of jobs and about 10% of retail sales.
Car sales in April fell by 31.6% over the same period last year, according to the Bureau of Statistics. This was better than the peak decline in early 2020 – by 37% over the same period last year in January and February of that year – but worse than the 0% year-on-year change recorded in April 2020.
Catering sales fell 22.7%, better than the 31.1% drop from the same period last year in April 2020. Restaurants in Shanghai were virtually closed in April, while Beijing’s ban on eating in restaurants only took effect in early May.
Compared to the same period last year, only beverages, medicines, food and oil products grew in the retail trade.
“Although the number of Covid cases has dropped markedly since the peak in mid-April, the lifting of blockades has been extremely slow, in part due to the caution of local government officials,” said Ting Lu, Nomura’s chief economist for China. “Therefore, we believe that local blockages will still have a strong impact on the completion of production in May and consider a quick turnaround almost impossible.”
The city of Shanghai announced on Sunday that it will gradually open restaurants, and said Monday that the city is looking to resume normal production and life by mid-June.
Unemployment is rising
Unemployment in China’s 31 largest cities rose to a new high of 6.7% in April, according to at least 2018.
Unemployment in cities rose 0.3 percentage points from March to 6.1% in April. The unemployment rate between the ages of 16 and 24 was almost three times higher at 18.2%.
To further feel the scale of the economic downturn in April, other data showed a drop in demand from businesses and individuals for loans.
Total social financing – a broad measure of credit and liquidity – fell about half last month to 910.2 billion yuan ($ 134.07 billion) from the same period last year, the People’s Bank of China said on Friday night.
However, Macquarie’s chief economist for China Larry Hu said he expects the drop in demand for loans to be short-lived. He noted that on Sunday the central government launched its “first action … to save property” by lowering mortgage rates for first-time homeowners.
The rate, which previously followed the five-year rate on loans as a benchmark, is now 20 basis points lower than it.
“Today’s cuts are far from enough to break up the real estate sector, but there would be an even greater softening of ownership,” Hu said in a note on Sunday.
According to Moody’s, real estate and related industries account for about a quarter of China’s GDP.