Data on China’s industrial output, investment and retail sales due Monday are forecast to show an across-the-board contraction for the first time on record, evidence of the extent to which the coronavirus has ravaged the economy. The data is released on a combined basis to account for the normal seasonal swings around the Lunar New Year holiday. The epidemic and attempts to slow its spread suddenly paralyzed China’s economy during that break, forcing consumers to cut spending and stay home, factories to extend their production halt, and trapping millions of people far from where they work. That crippled activity across the economy, with car and home sales slumping, and trade and travel interrupted.
“Most likely Jan.-Feb. is the lowest point for this year and the growth momentum is clearly improving in March,” but the current consensus of 4% GDP growth in the first quarter will be under pressure after the data, Macquarie Group Ltd Chief China Economist Larry Hu said Friday. “The bad news is the recovery has been slower than expected, while the good news is that it’s still recovering.”
The central bank acted on Friday to soften the blow and help the economy, providing banks more money to lend by cutting the amount of cash they must place in reserve at the People’s Bank of China. That cut takes effect on Monday, just as markets see the data for the first two months of the year.