China retail sales sink to lowest level since early on in pandemic

Retail sales plunged last month to their lowest since the early days of the pandemic in China, amid strict lockdowns across the country, raising further doubts over whether it can meet the economic growth target for this year.

Unemployment has also gone up in the world's second-largest economy, putting further pressure on the government to create jobs as a record 10.76 million graduates prepare to enter the workforce.

China's gross domestic product (GDP) grew 4.8 per cent between January and March year on year, figures released yesterday showed, surpassing the forecasts of economists of between 4.2 and 4.4 per cent.

The fall in consumer spending and the growth in unemployment last month could spell more trouble for the economy, which is already battling disruptions wrought by the government's stringent zero-Covid-19 policy and uncertainties arising from the Ukraine war, said economists.

Some analysts have downgraded their forecast for GDP growth this year to 4.8 to 5 per cent, saying that the country faces a big challenge to meet the "around 5.5 per cent" target set last month.

Consumer spending last month fell 3.5 per cent compared with the same period last year - the first decline since July 2020, after retail sales shrank for seven straight months due to Covid-19.

Surveyed unemployment went up to hit 5.8 per cent - 0.3 percentage point higher than a month ago and eclipsing the previous high in May 2020 - bringing the overall rate to 5.5 per cent for the first quarter.

The uptick in unemployment was due to a seasonal cycle as workers traditionally change jobs after Chinese New Year, which was in early February this year, Dr Fu Linghui, a spokesman for the National Bureau of Statistics, said during a briefing on the data release.

Still, pressures on employment heightened last month because of limits on industrial production and declining demand for services due to the pandemic, added Dr Fu, who is also director-general of the bureau's department of comprehensive statistics.

Mr Zhang Zhiwei, chief economist at Pinpoint Asset Management, said the latest increase in unemployment had exceeded that of the early days of the pandemic, a sign that the redundancy problem had worsened in China.

When he announced the closely watched GDP growth target during the annual parliamentary meetings last month, Chinese Premier Li Keqiang said that achieving it would not be easy.

The task has since been made harder after Covid-19 outbreaks in a number of key cities, such as tech and manufacturing hub Shenzhen and financial capital Shanghai.

"The country is facing recurring waves of the pandemic in many places, and its impact on the economy is increasing," said Dr Fu, adding that the economy had remained generally stable nonetheless, and grew steadily in the first quarter this year.

Economists said that China's strong economic performance in the first two months of this year had provided the country with a much-needed buffer for the hit in March.

But the current lockdown in Shanghai, which has severely disrupted logistics in China, sets the second quarter off on a poor start, they added. They also warned that unemployment may worsen this year.

But Dr Larry Hu, chief China economist at financial services firm Macquarie Group, remained more optimistic, pointing to how consumption might "snap back on pent-up demand" once lockdown measures are eased.

"As a result, the Chinese economy might get better in May after getting worse in April," he said.

The latest data showed that investment growth and industrial output slowed down in March from the first two months this year as well.

A bright spot was trade, with the total value of imports and exports growing 10.7 per cent in the first three months of this year, compared with the same period last year.