Covid lockdowns weigh on retail and industrial production data

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

Xie Chen | Visual Group China | Getty Images

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

Retail sales fell 11.1% in April from a year ago, more than the 6.1% drop predicted in a Reuters poll.

Industrial production fell 2.9% in April from a year ago, contrary to expectations of a slight increase of 0.4%.

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

“The increasingly bleak and complex international environment and the heightened shock of [the] The Covid-19 pandemic at home has clearly exceeded expectations, further downward pressure on the economy has continued to grow,” the statistics office said in a statement. The office said the impact of Covid is temporary and that the economy “is expected to stabilize and recover.”

Capital investment for the first four months of the year rose 6.8% from a year ago, slightly beating expectations of 7% growth. Investment in real estate fell by 2.7%, while that in the manufacturing sector increased by 12.2% and that in infrastructure by 6.5%.

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

The jobless rate in China’s 31 largest cities hit 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 higher, at 18.2%.

To give an additional idea of ​​the depth of the economic slowdown in April, other data showed a collapse in demand for loans from businesses and households.

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Total social financing – a large measure of credit and liquidity – fell by about half last month from a year ago to 910.2 billion yuan ($134.07 billion), the People’s Bank of China announced on Friday.

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

The rate, which followed the five-year prime lending rate as a benchmark, is now 20 basis points below that rate.

“Today’s reduction is nowhere near enough to lift the real estate sector, but more real estate easing 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 a developing story. Please check for updates.

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