China’s Economy Set to Shrink 6% This Quarter, Macquarie Says

(Bloomberg) --

China’s economy is expected to shrink 6% this quarter compared to a year earlier, which would be the first such contraction on record, according to Macquarie Group Ltd.

Data out Monday showed an across-the-board slump in manufacturing, retail sales and investment in January and February. That will make it even more difficult for China’s top leadership to achieve its growth targets for the year, even with an “unprecedented rebound” likely in March and the second quarter, the investment bank’s chief China economist, Larry Hu, wrote in a note after Monday’s data release.

“Given the big fall in 1Q, it’s extremely difficult for China to grow 5%, not mention 6% this year,” Hu said.

China’s Economy Suffers Historic Slump Due to Virus Shutdown (1)

Industrial output, retail sales and fixed-asset investment all plunged by double digits in the first two months of the year, worse than economists estimated, as the coronavirus shuttered factories, shops and restaurants across the nation. With the virus now spreading rapidly in Europe, the U.S. and other parts of the world, a drop in demand for Chinese exports is set to prolong the damage to firms and the economy.

China’s supply and demand shock could be exacerbated if the virus triggers a global recession and hurts external demand, Hu said.

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