China’s economic data disappoint in April as Covid controls weigh
China reported a drop in retail sales and industrial production in April — far worse than analysts had expected.
Retail sales fell by 11.1% in April from a year ago, more than the 6.1% decline predicted in a Reuters poll.
Industrial production dropped by 2.9% in April from a year ago, in contrast with expectations for a slight increase of 0.4%. The output of mining and utilities businesses grew.
But manufacturing fell by 4.6%, mostly dragged down by a slump in the auto sector and equipment manufacturing, said Statistics Bureau Spokesperson Fu Linghui. In addition to Covid, he said industrial production faces pressure from insufficient market demand, rising costs and other factors.
Last month, the persistent spread of Covid and resulting stay-home orders — primarily in Shanghai — forced factories to close or operate at limited capacity.
The “increasingly grim and complex international environment and greater shock of [the] Covid-19 pandemic at home obviously exceeded expectation, new downward pressure on the economy continued to grow,” the statistics bureau said in a statement. The bureau said the impact of Covid is temporary and that the economy “is expected to stabilize and recover.”
Fixed-asset investment for the first four months of the year rose by 6.8% from a year ago, slightly missing expectations of 7% growth. Investment in real estate declined by 2.7%, while that in manufacturing rose by 12.2.% and that in infrastructure rose by 6.5%.
China’s passenger car production dropped by 41.1% year-on-year in April, according to the China Passenger Car Association. The auto sector in China accounts for about one-sixth of jobs and roughly 10% of retail sales, according to official figures for 2018 compiled by the Ministry of Commerce.
Auto sales dropped by 31.6% in April from a year ago, the statistics bureau data showed. That was better than the peak of the decline in early 2020 — down 37% year-on-year in January and February that year — but worse than the 0% year-on-year change recorded for April 2020.
Catering sales plunged by 22.7% — better than a 31.1% year-on-year drop in April 2020. Restaurants in Shanghai were essentially closed in April, while Beijing city’s ban on dining in restaurants only took effect in early May.
Within retail sales, only beverages, medicine, food and petroleum products saw year-on-year growth.
“Although Covid case numbers have declined markedly from the peak in mid-April, the unwinding of lockdowns has been extremely slow, due partly to the caution among local government officials,” Ting Lu, Chief China Economist at Nomura, said in a note. “Therefore, we believe local lockdowns will still severely impact the production-end of the economy in May and view a quick turnaround as all but impossible.”
Shanghai city announced Sunday that it would start to allow restaurants to reopen gradually, and said Monday the city aimed to resume normal production and life by the middle of June.
Jobless rate ticks higher
The unemployment rate in China’s 31 largest cities climbed to a new high of 6.7% in April, according to data going back at least to 2018.
The unemployment rate across cities rose by 0.3 percentage points from March to 6.1% in April. The jobless rate among those aged 16 to 24 was nearly three times higher at 18.2%.
For an additional sense of the scale of economic slowdown in April, other data showed a slump in business and household demand for loans.
Total social financing — a broad measure of credit and liquidity — roughly halved last month from a year ago to 910.2 billion yuan ($134.07 billion), the People’s Bank of China said late Friday.
However, Macquarie’s Chief China Economist Larry Hu said he expected the drop in credit demand would be short lived. He pointed out that on Sunday, the central government took its “first action … to save property” by cutting mortgage rates for first-time homebuyers.
The rate, which used to follow the five-year loan prime rate as a benchmark, is now 20 basis points below that.
“Today’s cut is far from enough to turn the property sector around, but more property easing would come,” Hu said in a note Sunday.
Real estate and related industries account for about a quarter of China’s GDP, according to Moody’s.