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

Introduction: China’s economic activity slides as Covid lockdowns hit growth

People riding vehicles in Beijing, China, today
People riding vehicles in Beijing, China, today Photograph: Tingshu Wang/Reuters

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

China 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, 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 in industrial production since early 2020, as the ‘zero covid’ strategy forced factories to suspend operations and disrupted supply chains.

China’s labour 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, early in the pandemic.

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, where some businesses such as gyms, malls, and cinemas were closed in its largest district.

Alicia García-Herrero, chief 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.”

Hello Monday. For #China, this is 2020 all over again with retail sales collapsing more than 11% on a year-on-year basis. #Shanghai will be opening up slowly, but this means the impact of #lockdowns is ongoing. The damage has been done and this will show up in global macro data.

— True Insights (@true_insights_) May 16, 2022

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 criticise 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”.

The agenda

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


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