China: Industrial production nosedives at the start of the year due to Covid-19 outbreak
Industrial production plummeted 13.5% year-on-year in the first two months of the year, the sharpest contraction since records began in January 1990. The print contrasted the 6.9% rise in December and was well below the 3.0% contraction that market analysts had expected.
On a month-on-month seasonally-adjusted basis, industrial production plunged 26.6% in February, exceeding the 2.8% drop in January. Annual average growth in industrial production, meanwhile, tumbled from 5.7% in December to 4.0% in January-February.
Industrial production is expected to remain lackluster in the coming months. Against this backdrop, Iris Pang, Greater China economist at ING, comments that:
“As China’s coronavirus cases subside, the rest of the world has more confirmed cases, including China’s manufacturing partners in Europe, the rest of Asia and the US. This means supply chains are broken. Equally important, demand from these economies will shrink substantially when people avoid shopping and gathering at restaurants, just like the experience of China during the past two months. This is another severe hit for China’s factories and exporters, as orders should pull back.”