Monday Markets Mail (CW 19)

Corona - Zero Covid strategy hits China's economy hard

Beijing (APA/Reuters/dpa/AFP) - Strict restrictions imposed by China's zero-covid strategy are slowing the second-largest economy more than expected. Industrial production surprisingly fell by 2.9 percent in April compared to the same period last year, the statistics bureau reported in Beijing on Monday. Retail sales also slumped more sharply than analysts had predicted, by 11.1 percent. The unemployment rate remained at 6.1 percent, just below the all-time high.
Analysts polled by Reuters had expected industrial production to grow 0.4 percent. For retail sales, they had expected only half the current decline. The unemployment rate is now almost as high as it was in February 2020 during the start of the Corona pandemic, when it peaked at 6.2 percent.
Experts say the figures suggest that the downturn this year will be more severe than expected. "The data for April activity exposed the damage from the lockdowns in Shanghai and other parts of the country," Chang Shu and Eric Zhu wrote in an analysis by financial agency Bloomberg. "The impact is much broader and deeper than expected."
The arrival, of the fast-spreading Omicron variety is putting China's strict zero-covid strategy to the test. Tens of millions of people in metropolises such as Shanghai, Changchun and Jilin province have been stuck in lockdowns for weeks and are not allowed to leave their homes. In Beijing, numerous neighborhoods have been sealed off. Most shops and many underground stations are closed. Millions must work in their home offices.