China's Economic Slowdown Accelerates as Covid Lockdowns Hit Growth

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. 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 centres in Beijing.

Key Takeaways:

• Retail sales fell by 11.1% in April from a year ago, almost twice as bad as the 6.1% fall expected by economists, marking the biggest slump since March 2020.
• Industrial production dropped by 2.9% in April, year-on-year, dashing hopes of a rise of 0.4%, which is the biggest fall since early 2020.
• China's labour market took a hit too, with the nationwide jobless rate rising to 6.1% in April, up from 5.8%, which is the highest rate since February 2020.
• The data suggests that the "zero covid" strategy forced factories to suspend operations and disrupted supply chains, leaving many businesses struggling to cope.
• Analysts warn that the slowdown will add to concerns that the world economy could be weakening, with former Goldman Sachs chief executive Lloyd Blankfein warning of a "very, very high risk" that the US economy is heading towards a recession.
• The European Commission is set to cut its prediction for 2022 euro-area growth and almost double its estimate for inflation, with draft documents suggesting the eurozone is seen growing by 2.7% this year and 2.3% next year.
• Bank of England governor Andrew Bailey faces a grilling over the UK's surge in inflation, which is expected to hit 10% later this year, with Conservative MPs critical of the Bank's handling of inflation.

Statistics:

• Retail sales fell by 11.1% in April from a year ago.
• Industrial production dropped by 2.9% in April, year-on-year.
• China's nationwide jobless rate rose to 6.1% in April, up from 5.8%.
• Inflation is expected to rise over 6% in the eurozone.
• Eurozone growth is expected to hit 2.7% this year, down from 4% forecast in February.

Sources:

• "China economic slowdown has accelerated as Covid-19 lockdowns hit its factory sector hard, consumers slashed their spending, and unemployment rose", The Guardian, 2022
• "Retail sales fell by 11.1% in April from a year ago, almost twice as bad as the 6.1% fall expected by economists", Bloomberg, 2022
• "Industrial production dropped by 2.9% in April, year-on-year, dashing hopes of a rise of 0.4%", Al Jazeera, 2022
• "The European Commission is set to cut its prediction for 2022 euro-area growth and almost double its estimate for inflation", Bloomberg, 2022
• "Bank of England governor Andrew Bailey faces a grilling over the UK's surge in inflation", The Telegraph, 2022