China faces a drawn-out struggle to revive its economy after it suffered its biggest contraction since at least the 1970s after ordering hundreds of millions of people to stay home to fight the coronavirus.
The world’s second-largest economy shrank by 6.8 per cent from a year earlier in the quarter ending in March after factories, offices and shopping malls were closed to contain the outbreak, official data showed Friday. Consumer spending, which supplied 80 per cent of last year’s growth, and factory activity were weaker than expected.
China, where the pandemic began in December, is the first major economy to start to recover after the ruling Communist Party declared the virus under control last month. It has allowed factories to reopen but cinemas and other businesses that employ millions of workers still are closed.
‘V-shaped’ recovery seen as unlikely
There are signs that after an “initial bounce” as controls ended, “the recovery in activity has since slowed to a crawl,” Julian Evans-Pritchard of Capital Economics said in a report.
“China is in for a drawn-out recovery.”
Forecasters earlier said China might rebound as early as this month. But they say a sharp, “V-shaped” recovery looks increasingly unlikely as negative export, retail sales and other data pile up.
Instead, they expect a gradual crawl back to growth in low single digits in the coming quarters. For the full year, forecasters including UBS, Nomura and Oxford Economics expect little to no growth.
Retail sales fell 19 per cent from a year earlier in the first quarter. That improved in March, the final month of the quarter, to a decline of 15.8 per cent. But consumers, jittery about possible job losses, are reluctant to spend despite government efforts to lure them back to shopping malls and auto showrooms.
That is a blow to automakers and other companies that hope China will power the world economy out of its most painful slump since the 1930s.
Labourers wear face masks to protect against the spread of the novel coronavirus as they look at job postings at a market in Qingdao, in eastern China’s Shandong province, on April 8. (Chinatopix/The Associated Press)
Job-hunter Ni Hong’s challenge highlights the problem. Ni, 32, quit her job in Beijing in January to find a new one, but the virus disrupted those plans. Ni is paying her mortgage out of her savings and avoiding other spending while she looks in a market flooded with newly laid-off workers.
“In the past, there were maybe two or three candidates for a post,” Ni said. “Now, I have eight to 10 competitors, so the chance for me to be eliminated is much higher.”
China’s leaders base their claim to power on their ability to deliver economic success. The ruling party has appealed to companies to keep paying employees and avoid layoffs. But an unknown number have failed, adding to the public’s anxiety.
‘We are responding forcefully and massively’ to the crisis, says World Bank president David Malpass, as the most basic issues emerge. 1:20
Economy already squeezed by tariff war
The economy already was squeezed by a tariff war with U.S. President Donald Trump over Beijing’s technology ambitions and trade surplus. Last year’s growth sank to a multi-decade low of 6.1 per cent.
Exports were down 6.6 per cent in March from a year earlier, an improvement over the double-digit plunge in January and February. But forecasters say demand is bound to slump in America and Europe as anti-virus controls keep shoppers at home.
“Lingering consumption weakness and sliding foreign demand will weigh on the upturn,” Louis Kuijs of Oxford Economics said in a report.
Growth was stronger than some forecasts that called for a contraction of up to 16 per cent, but this is the biggest contraction since market-style reforms started in 1979.
“The numbers were even uglier than most anticipated, which is good!” Andy Rothman of Matthews Asia said in a report. “These ugly numbers indicate that the leadership didn’t fudge the data to hide the seriousness of the situation.”
Investment in factories, real estate and other fixed assets, the other major growth driver, sank 16.1 per cent.
Auto sales sank 48.4 per cent from a year earlier in March. That was better than February’s record 81.7 per cent plunge but is on top of a two-year-old decline that is squeezing global and Chinese automakers in the industry’s biggest global market.
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.
