China’s economic activity slides as Covid lockdowns hit growth – business live | Business

China’s slowdown in April will reinforce global growth concerns, warns Lee Hardman of MUFG bank:

Economic weakness was widespread in April as retail sales contracted by an annual rate of -11.1%, industrial production by -2.9% and property investment by -2.7% on a year to date basis.

The latest data clearly highlights the economic damage afflicted by the government’s continued commitment to their zero-COVID strategy. It will encourage further downgrades to forecasts for economic growth in Q2 and for this year as a whole. The current Bloomberg consensus forecast is for annual GDP growth to slow from 4.8% in Q1 to 4.0% which now appears too optimistic.

The longer the COVID restrictions remain in place the greater the downside risks to growth for the year as a whole and the current Bloomberg consensus forecast for growth of 4.8% in 2022.

Tommy Wu, lead China economist at Oxford Economics, said lockdowns are ‘severely’ affectin China’s supply chains:

“The prolonged Shanghai lockdown and its ripple effect through China, as well as logistics delays resulting from highway controls… have severely affected domestic supply chains,”

China’s disappointing economic numbers have buffeted economic sentiment further, reports Naeem Aslamanalyst at avatar:

Clearly, it is China’s zero-tolerance policy that is causing the industrial output and consumer spending to break down, and currently, they are sitting at their worst level since the pandemic began.

The data has made traders anxious about the global economic outlook. The general trend is likely to prevail in the market, which is that the dollar index continues to act as a safe haven, Treasuries will soar, and oil prices may move further lower; this shows that this week could be another week of weakness for the global equity markets.

Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.

China’s economic slowdown has accelerated as Covid-19 lockdowns hit its factory sector hard, consumers slashed their spending, and unemployment rose.

Retail sales and factory output both plunged at the fastest rate since early in the pandemic, with analysts warning of no quick recovery.

retail sales fell by 11.1% in April from a year ago, almost twice as bad as the 6.1% fall expected by economists. It is the biggest slump since March 2020, in the first wave of Covid, with many consumers either under restrictions, or worried about the economic outlook.

industrial production dropped by 2.9% in April, year-on-year, dashing hopes of a rise of 0.4%. That’s the biggest fall since early 2020, as the ‘zero covid’ strategy forced factories to suspend operations and disrupted supply chains.

China’s labor market took a hit too, with the nationwide jobless rate rising to 6.1% in April, up from 5.8%. That’s the highest rate since February 2020.

The data shows the rising economic cost from the tough restrictions brought into quash outbreaks of the pandemic, such as lockdowns in Shanghai, and mass testing and quarantine centers in Beijing, where some businesses such as gyms, malls, and cinemas were closed in its largest district.

Alicia Garcia-Herrerochief Asia Pacific economist at natixis in Hong, told Al Jazeera that ““The data might be only the start of the recession”.

“Given the continuation of the COVID restrictions in May, the data will not be good in this month as well.

We shall expect more rescue policies to support private and small enterprises, which are important hubs for employment, as unemployment increased to 6.1% in April.”

The slowdown will add to concerns that the world economy could be weakening.

Last night, former Goldman Sachs chief executive Lloyd Blankfein warned there was a “very, very high risk” that the US economy was heading towards a recession.

Blankfein, now Goldman’s Senior Chairman, told CBS News’ “Face the Nation” that companies and consumers should prepare for a recession as the Federal Reserve lifts interest rates to tackle inflation, but added that it’s not ‘baked in the cake’ yet.

“If I were running a big company, I would be very prepared for it.

If I was a consumer, I’d be prepared for it.”

European stock markets are set to open a little lower, having ended last week with a strong rally. But despite that bounce, global stocks sank for a sixth consecutive week, the longest losing streak since the middle of 2008.

Also coming up today

The European Commission is set to cut its prediction for 2022 euro-area growth and almost double its estimate for inflation, when it releases its latest economic forecasts today.

Draft documents seen by Bloomberg and the FT show that the eurozone is seen growing by 2.7% this year, and 2.3% next year, down from 4% and 2.7% forecast in February.

Inflation is expected to rise over 6%, as consumers and businesses are hit by the energy crisis following the Ukraine war.

Bank of England Governor Andrew Bailey faces a grilling over the UK’s surge in inflation, when he appears before the Treasury Committee.

Conservative MPs are expected to criticize Bailey’s handling of inflation, which is expected to hit 10% later this year.

One cabinet minister has told the Telegraph that the Bank has been failing to “get things right”, with another saying government figures were “questioning its independence”.

agenda

• 10am BST: European Commission publishes Spring Forecasts
• 3.15pm BST: Treasury committee hearing with the Bank of England