China's consumer spending and other business activity fell even more than expected in January and February due to its virus outbreak, adding to the ruling Communist Party's challenges as it tries to revive the world's second-largest economy.
Retail sales fell 20.5 per cent from a year earlier after shopping malls and other businesses were closed in late January, government data showed Monday. Factory output declined by a record 13.5 per cent after the Lunar New Year holiday was extended to keep manufacturers and offices closed.
The data were even bleaker than economists expected. They warned manufacturers and others will struggle despite official efforts to reopen factories and other businesses in many areas while preventing a new spike in infections.
This is not the end of the nightmare. Watch out! wrote economist Iris Pang of ING in a report.
The ruling party has eased some controls and allowed factories and some other businesses to reopen in many areas. But companies and economists say it will be months before activity returns to normal levels.
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They say that might be pushed back further because the United States and European governments are imposing travel and other curbs that will depress demand for Chinese exports.
The latest data point to an even deeper contraction this quarter, said Julian Evans-Pritchard of Capital Economics in a report.
The March data are likely to be even worse, said Evans-Pritchard.
The January-February period looks better because it includes the start of January, before anti-virus controls hit, said Evans Pritchard.
Further ahead, the pace of recovery is likely to remain slow, he said. The global spread of the virus will hold back the rebound in exports, even as factories return to normal operation. Investment by private businesses tumbled 26.4 per cent while commercial real estate sales plummeted 39.9 per cent, the National Bureau of Statistics reported.