China Industrial Production, Retail Sales Weaken On Covid Restrictions

China’s industrial production declined unexpectedly in April reflecting not only the disruption caused by the Covid-19 lockdown, but also weaker foreign demand. Further, the decrease in retail sales worsened on weak household consumption.

Industrial production dropped 2.9 percent on a yearly basis, reversing a 5.0 percent fall in March, data published by the National Bureau of Statistics showed on Monday. The decline confounded 0.4 percent rise economists had expected.

At the same time, retail sales plunged 11.1 percent annually, much worse than the 3.5 percent decrease in March. Economists had forecast a 6.1 percent fall.

Official data also showed that fixed asset investment during the January to April period advanced 6.8 percent from the same period last year.

That compared to the expected growth of 7.0 percent. Investment in real estate contracted, while investment in manufacturing logged a robust growth.

The urban unemployment rate rose to 6.1 percent from 5.8 percent in the previous month.

“The upshot is that while the worst is hopefully behind us, we think China’s economy will remain relatively weak in the coming quarters, with output struggling to return to its pre-pandemic trend,” Julian Evans-Pritchard, an economist at Capital Economics, said.

Elsewhere, the People’s Bank of China maintained the interest rate on one-year medium-term lending facility at 2.85 percent on Monday. The central bank added CNY 100 billion of liquidity into the system.

The interest rate on seven-day reverse repurchase agreement was retained at 2.1 percent.

Data released last week showed that banks extended CNY 645.4 billion in new yuan loans in April, well below the expected level of CNY 1.51 trillion and March’s lending of CNY 3.13 trillion due to constrained economic activity.

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