Chinese Economy Shrinks 6.8 Percent In First Quarter

China's economy shrank for the first time in almost three decades of records in the first quarter, as the coronavirus paralysed production and spending, raising pressure on authorities to do more to stop mounting job losses.

Gross domestic product (GDP) fell 6.8% in January-March year-on-year, official data showed on Friday, slightly larger than the 6.5 percent decline forecast by analysts and reversing a 6 percent expansion in the fourth quarter of last year.

The contraction is also the first in the world's second-largest economy since at least 1992 when official quarterly GDP records started.

Providing a silver lining was a much smaller-than-expected decline in factory production in March, suggesting efforts to restart parts of the economy since February are working.

However, analysts say Beijing faces an uphill battle to revive growth as the global spread of virus devastates demand from major trading partners, while domestic consumption also remains under pressure.

"First-quarter GDP data is still largely within expectations, reflecting the toll from the economic standstill when the whole society was on lockdown," said Lu Zhengwei, Shanghai-based chief economist at Industrial Bank.

"Over the next phase, the lack of overall demand is of concern. Domestic demand has not fully recovered as consumption related to social gatherings is still banned while external demand is likely to be hammered as pandemic spreads."

On a quarter-on-quarter basis, GDP fell 9.8% in the first three months of the year, the National Bureau of Statistics said, just off expectations for a 9.9% contraction, and compared with 1.5% growth in the previous quarter.

Statistics bureau spokesman Mao Shengyong told a press briefing after the data that China's economic performance in the second quarter is expected to be much better than in the first.

However, weaker domestic consumption, which has been the biggest growth driver, remains a concern, as incomes slow and much of the rest of the world falls into recession.

"We are hesitant to think that this is just a one quarter event, Q2 will also likely be lower than expectation," said Ben Luk, senior multi asset strategist at State Street Global Markets in Hong Kong.

"To offset weakness in external demand, we will see some policy support later this month or early May."

Industrial output fell by a less-than-expected 1.1 percent in March from a year earlier.

Highlighting the challenges in consumption, however, was a 15.8 percent fall in retail sales, which was larger than expected. (Reuters)

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