The coronavirus pushed China’s economy into its first contraction in decades in the first quarter, with the spread of the disease around the world now leaving the nation reliant on fragile domestic demand to spur a recovery.
Gross domestic product shrank 6.8 per cent from a year ago, the worst performance since at least 1992 when official releases of quarterly GDP started and missing the median forecast of a 6 per cent drop. China’s economy hasn’t contracted on a full-year basis since the end of the Mao era in the 1970s.
Retail sales slid 15.8 per cent in March as consumers remained wary, while investment decreased 16.1 per cent in the first three months of the year. A brighter sign was the smaller-than-expected contraction in March industrial production of 1.1 per cent as factories returned to work amid easing lockdowns.
Both retailing and factory output showed improvement from the nadir in the first two months, suggesting a stabilization in economic activity.
“We expect this recovery to continue,” said Louis Kuijs, head of Asia economics at Oxford Economics Hong Kong Ltd. “However, the upturn will be slowed down by lingering consumption weakness and sliding foreign demand.”
China’s markets held on to gains after the release and ended slightly higher as investors had already anticipated the weak data. The Shanghai Composite Index was up 0.66 per cent at 3 p.m., while the Hang Seng Index climbed 1.56 per cent in Hong Kong.
The economy was forced into a paralysis in late January as the epidemic that first started in Wuhan spread across the country. The economy remained shuttered for much of February with factories and shops closed and workers stranded at home. The process of resuming business has been slow and the return rate only inched up to around 90 per cent at the end of March, Bloomberg Economics estimates.
To cushion the economic blow, China has unveiled a range of support measures and has increased fiscal and monetary support — although not on the scale of other nations.
A meeting of the Communist Party’s Politburo in the coming days may provide further signals as to the direction of policy support.
What Bloomberg’s Economists Say…
“The March activity data suggest the recovery will be a long haul — especially with the pandemic clobbering external demand. A much narrower decline in production points to strong improvement on the supply side, as our back-to-work gauges have flagged. This partly explains the limited drop in GDP, which is production based. But foundering retail sales and investment underline continued weaknesses on the demand side.”
–Chang Shu.
While exports fell less than expected in March as production capacity was gradually restored, economists warn headwinds lie ahead as the rest of the world shuts down and external demand diminishes.
“Most major economies are still in the lockdown stage,” Robin Xing chief China economist at Morgan Stanley Asia, said on Bloomberg TV. “As a result, growth in the second quarter will be shallow, just marginally above zero.”
On the positive side, the surveyed jobless rate actually declined in March, to 5.9% from February’s record 6.2%. That suggests China is so far avoiding the kind of job destruction seen in the U.S., where more than 5 million Americans filed for unemployment benefits last week, bringing the total in the month since the coronavirus pandemic throttled the U.S. economy to 22 million people.
Consumers Key
Much depends now on whether consumers regain a willingness to spend amid nervousness that the virus can stage a comeback as controls are relaxed. Evidence from the epicenter of the virus, Wuhan, suggests progress will be slow.
While factories around Wuhan are working around the clock to get back up to speed, the recovery of consumer-focused businesses won’t be straightforward. People are cautiously taking to the streets again, but they remain subject to curbs on their movements aimed at keeping the virus at bay.
The nation’s per capita disposable income declined by 3.9 per cent in real terms in the first quarter from a year ago, the first contraction since the data was available in 2014.
Consumer caution “continues to restrain demand, and thus activity more broadly,” said Frederic Neumann, co-head of Asia economic research at HSBC Holdings Plc in Hong Kong. “This is reminder also for other economies of the arduous path to full recovery even after full lockdowns are removed. All this points to the need for a more determined policy push on both the monetary and fiscal fronts to ‘shock the system’ and get activity back up to its earlier vitality.”–With assistance from Tomoko Sato, Yinan Zhao and Miao Han.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
OTTAWA – The economy added 47,000 jobs in September, while the unemployment rate declined for the first time since January to 6.5 per cent, Statistics Canada reported on Friday.
The agency says youth and women aged 25 to 54 drove employment gains last month, while full-time employment saw its largest gain since May 2022.
The overall job gains followed four consecutive months of little change, the agency said.
The unemployment rate has been steadily climbing over the past year and a half, hitting 6.6 per cent in August.
Inflation that month was two per cent, the lowest level in more than three years as lower gas prices helped it hit the Bank of Canada’s inflation target.
The central bank has cut its key interest rate three times this year, and is widely expected to keep cutting as inflation has subsided and the broader trend points to a weakening in the labour market.
Despite the job gains in September, the employment rate was lower in the month, reflecting continued growth in Canada’s population.
Statistics Canada said since the employment rate saw its most recent peak at 62.4 per cent in January and February 2023, it’s been following a downward trend as population growth has outpaced employment growth.
On a year-over-year basis, employment was up by 1.5 per cent in September, while the population aged 15 and older in the Labour Force Survey grew 3.6 per cent.
The information, culture and recreation industry saw employment rise 2.6 per cent between August and September, after seven months of little change, Statistics Canada said, with the increase concentrated in Quebec.
The wholesale and retail trade industry saw its first increase since January at 0.8 per cent, while employment in professional, scientific and technical services was up 1.1 per cent.
Average hourly wages among employees rose 4.6 per cent year-over-year to $35.59, a slowdown from the five-per-cent increase in August.
The unemployment rate among Black and South Asian Canadians between 25 and 54 rose year-over-year in September and was significantly higher than the unemployment rate for people who were not racialized and not Indigenous.
Black Canadians in that age group saw their unemployment rate rise to 11 per cent last month while for South Asian Canadians it was 7.3 per cent. For non-racialized, non-Indigenous people, it rose to 4.4 per cent.
This report by The Canadian Press was first published Oct. 11, 2024.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.
