China’s industrial output fell 2.9% in April from a year ago, while retail sales fell 11.1% as the country’s harsh lockdowns took their toll on the economy. While the output from the mining and utilities sectors increased, manufacturing output declined by 4.6%. The auto and equipment-manufacturing sectors have been worst affected by these lockdowns — resulting in even more shortages around the world.
Unemployment rates in major cities also rose, which contributed to the drop in retail sales. Economists are now lowering their forecasts for China’s economic growth for the year, with some saying they believe the economy may already be entering a recession.
The interruption to manufacturing is also affecting global companies like Apple (NASDAQ:AAPL), Tesla (NASDAQ:TSLA) and Toyota (NYSE:TM), who have manufacturing operations in China. Foreign companies are now reducing their investments in China, and some are even considering relocating their operations elsewhere, according to a recent survey by the American Chamber of Commerce in China. Besides the Covid-related lockdowns, businesses are also concerned about geo-political issues and China’s close relationship with Russia.