China’s GDP Slumps for the First Time in Decades Due to the Coronavirus China’s economy shrank 6.8% year over year in the first quarter of 2020, after 6% growth the previous quarter, according to the National Bureau of Statistics of China. This was below the 6.5% reduction that analysts surveyed in a Reuters poll had predicted, and it was the country’s first GDP contraction since 1992. The unprecedented plunge was caused by a roughly two-month-long shutdown and a halt on almost all business activities. China’s exports dropped 11.4% in the first quarter of 2020. According to the Ministry of Industry and Information Technology, 99% of China’s major industrial enterprises had resumed production and 94% of employees had returned to work as of April 14, 2020. The government has unleashed a range of stimulus measures and is considering implementing other policies to fuel the economy, such as increasing the deficit-to-GDP ratio. However, China could continue to face challenges in its exports due to weakened global demand. [caption id="attachment_108034" align="aligncenter" width="700"] Source: National Bureau of Statistics of China[/caption]   China’s Retail Sales Drop in March, but Less Severely than in January/February China’s retail sales plunged 15.8% in March 2020, with the decline easing by 4.7 percentage points versus the first two months of the year. However, the March decline was much worse than the analyst consensus of a 10% fall. Retail sales excluding automobiles in March fell 15.6%. The decelerating year-over-year decline of retail sales in March suggests a gradual and sequential recovery. Retail sales in the first quarter of 2020 tumbled by 19.0%.

• The National Bureau of Statistics reported January and February data in aggregate.

[caption id="attachment_108035" align="aligncenter" width="700"] Note: Data for January and February 2020 are aggregated
Source: National Bureau of Statistics of China [/caption]   By sector, food sales remained robust, growing at 19.2% in March—an acceleration from January/February. Other sectors that saw sales expansion include traditional Chinese and Western medicine, which grew 8.0%, and communication appliances (such as cell phones), which—perhaps surprisingly—saw a 15.3-percentage-point swing take growth to 6.5%. Other discretionary sectors continued to see sales fall, although a number of sectors witnessed sequential improvements in the rate of decline. Apparel and footwear again took the largest hit, with sales down 34.8%; it was the only major sector to see the pace of decline deepen sequentially in March. Sales in the cosmetics sector dipped 11.6%, compared to a 14.1% contraction in the prior two months. Household appliances and electronics plummeted 29.7%, which was roughly the same sales decline seen in January/February. Sales growth for building and decoration materials improved 16.6 percentage points from the prior two months, to a 13.9% drop in March. The growth rate of furniture sales improved by 10.8 percentage points, albeit to a still-substantial 22.7% decline. [caption id="attachment_108036" align="aligncenter" width="700"] Source: National Bureau of Statistics of China[/caption]   Total online retail sales in the first quarter of 2020 fell 0.8% year over year, while online physical goods sales climbed 5.9% and accounted for 23.6% of total consumer goods sales. Growth was driven by online sales expansion in food and necessities, which grew 32.7% and 10.0% in the quarter, respectively. Online clothing sales slid 15.1% year over year in the quarter. China’s Industrial Production Dipped Slightly in March Although China’s industrial production slipped 1.1% in March, this represented a 12.4-percentage-point easing in the rate of decline versus the first two months of the year and was better than the analyst consensus of a 7.3% dip. The less-than-expected drop suggests a fast pace of factory recovery, as lockdowns were eased and travel restrictions were lifted. For the first quarter, industrial output fell 8.4% year over year. Industrial production of mining and quarrying increased 4.2% year over year in March; manufacturing decreased 1.8%; and production and distribution of electricity, heating power, gas and water were down 1.6%. [caption id="attachment_108037" align="aligncenter" width="700"] Source: National Bureau of Statistics of China[/caption]