LONDON, April 21, 2020 /PRNewswire/ -- China published its GDP growth rate for the first quarter of 2020. GDP grew by -6.8% y/y in Q1 and -9.8% q/q, the first ever negative figure since the start of the Economic Reform in 1978. This number is not surprising given the lockdown brought the economy to a near standstill for almost two months.
China's latest data bears more significance than normal. With many around the world still in lockdown, they are looking to China to size the economic costs of COVID-19 containment. The key takeaway is that the costs of lockdown are indeed large. Today's figures are broadly in line with our expectations.
Economic costs of the COVID-19 lockdown
China's economy contracted by 6.8% in Q1 2020, marking it the first contraction since the quarterly data were published since 1992. The previous official contraction in China was recorded in 1976 on an annual basis.
In our March Global Economic Outlook, we set out medium term forecasts for China. Our expectations were that China's economy will be hard by COVID-19. Today's data confirmed our view, which was informed by the terrible monthly reading of the combined January and February data release, and the return to work that took place at a steady place through March. We had expected growth in Q1 to fall by 5.1% y/y. But uncertainty around this figure was very high. This is captured well by a recent Reuters Poll. The average of the 57 analysts' expectation was -6.8% y/y, but their forecasts ranged from between -25% to + 4%, illustrating the huge degree of uncertainty around the figure.
Industrial production, a gauge of manufacturing, mining and utilities fell by 8.4% in Q1. But withing that IP rose by 1.1% in March. relative to a 13.5% decline in January and February. The March IP figure was much better than expectations of a 6.2% decline from Bloomberg.
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