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China reported that its first quarter GDP contracted by 6.8% in 2020 from a year ago as the world’s second largest economy took a huge hit from the coronavirus outbreak, data from the National Bureau of Statistics of China showed.
The contraction in the first quarter would also be the first decline since at least 1992, when official quarterly GDP records started, according to Reuters.
Analysts polled by Reuters had predicted China’s GDP would shrink by 6.5% in the January to March quarter, compared to a year ago. The forecasts from 57 analysts polled ranged from a 28.9% contraction to a 4% expansion. China’s economy grew 6% in the previous quarter, from September to December 2019.
China’s first quarter GDP fell 9.8% as compared to the fourth quarter of 2019, data from the bureau showed. In the first quarter, retail sales in China fell 19% from a year ago while industrial production fell 8.4% in the same period, it said.
That tells us that after coronavirus, even after the lockdowns have been lifted, people are cautious to consume. Shopping malls are open but they are not consuming, and that is the key.
Bo Zhuang
chief China economist at TS Lombard
The country is facing tremendous pressure amid increasing uncertainties and instabilities from the coronavirus outbreak, said the statistics bureau. The country is also facing new difficulties and challenges in resuming work and production.
While the headline GDP figure was not unexpected, the rest of the data did not bode well for the months ahead, said Bo Zhuang, chief China economist at TS Lombard.
“What is really important was that before March, everybody was expecting China to have a V-shaped recovery because it was actually (about) China supply disruption, but now we are seeing this demand shock,” Zhuang told CNBC. “The internal demand shock was massive. That tells us that after coronavirus, even after the lockdowns have been lifted, people are cautious to consume. Shopping malls are open but they are not consuming, and that is the key.”
Industrial production fell 1.1% on-year in the month of March, but that is a “false dawn” as lockdowns lifted, allowing delayed fulfillment of some orders from February, said Zhuang. A Reuters poll had expected March industrial production to fall 7.3% from a year ago.
The world’s second largest economy came to standstill earlier this year as Beijing implemented large-scale shutdowns and quarantines to limit human contact in order to contain the coronavirus outbreak.
China’s economy is beginning to come back online again, with work restarting in many companies, but it faces headwinds ahead. As demand from the rest of the world tanks due to the worldwide spread of the virus from mid-March, China’s industrial production and exports could worsen in April or May, said Zhuang.
The latest data comes after exports fell sharply in January and February compared to a year ago, and manufacturing activity plummeted.
A separate Reuters poll showed China’s GDP growth is expected to slow sharply to 2.5% in 2020 from 6.1% in 2019.
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