China's economy had a promising start this year, with first-quarter growth that exceeded predictions. However, with dozens of locations still under COVID-19 lockdowns, a dramatic dip in consumer expenditure and growing unemployment indicate far worse months to come.
According to the National Bureau of Statistics, China's Gross Domestic Product increased by 4.8% in the three months to March 31, in comparison to last year's in the same period.
A surprisingly strong economic performance in January and February boosted GDP, with many measures for those two months outperforming analyst expectations.
However, Beijing's measures to contain the country's largest viral outbreak in two years have slowed productivity since March, notably in Shanghai, the country's economic and production capital.
Retail sales fell 3.5% in March compared to the same month last year, the first decline since July 2020. In March, industrial production increased by 5%, compared to 7.5% in January and February.
According to NBS spokesperson Fu Linghui, who addressed a press conference in Beijing on Monday, the virus outbreaks in March interrupted business in some areas and impacted consumption. Hospitality, travel, and transportation sectors have been particularly heavily affected.
Unemployment has risen as a consequence of the pandemic shock, he added. In March, the rate of unemployment in 31 major cities reached a new high of 6%. Unemployment among individuals aged 16 to 24 reached 16%, the highest rate in eight months.
The Chinese government has set a 5.5% target rate for this year. This is the lowest in 30 years. However, many analysts believe that the pandemic, along with the conflict in Ukraine - which has pushed up oil and commodity costs - has already put that out of reach.
Some analysts are even speculating on the possibility of the economy regressing in the current quarter, as the ongoing real estate crisis in China adds to the strain. On Monday, market observers at Japanese investment bank Nomura stated, "Activity data are anticipated to tumble in April, as prospects of economic decline in Q2 rise."
Shanghai is at the heart of the ongoing outbreak, but it is not alone; according to Nomura, partial or full lockdowns are in effect in 45 cities, endangering a fifth of China's population and almost 40% of its GDP. The country's zero-virus policy remains the most significant risk to the country's economic prospects.
"In reality, the economic growth is in crisis," Societe Generale analysts warned on Monday. "As we've constantly emphasized, the issue is the lockdowns, which are still in effect and escalating."
