By Jonathan Cheng
BEIJING -- China's economy plummeted 6.8% in the first three months of the year compared with a year earlier, the country's first such drop since Beijing began reporting quarterly gross domestic product in 1992.
The sharp contraction in the world's second-largest economy offers a foreshadowing of the pain expected in the U.S. and around the world as the coronavirus pandemic shuts borders, halts business activity and cripples global supply chains.
China's 6.8% year-over-year pullback follows a 6% gain in the last three months of 2019 but is better than the 8.3% decline predicted by the median forecast of 15 economists polled by The Wall Street Journal.
Compared with the fourth quarter of 2019, China's GDP contracted by 9.8%.
The underlying picture offered some signs of recovery after the economy hit a nadir in February, though the numbers underscored the weakness of consumer spending.
China's urban jobless rate, which has for years remained largely static around 5% despite the ups and downs of the economy, remained at an elevated 5.9% at the end of March, after a 6.2% reading in February -- a record.
Industrial production fell 1.1%, versus expectations for a 7.5% pullback, while fixed-asset investment dropped 16%, in line with expectations. Retail sales fell 15.8% in March, much worse than expectations for an 8% decline.
Property investment fell 7.7% from a year earlier, while housing sales dropped 22.8%.
While the coronavirus has flattened the global economy, China has been reckoning with the crisis longer than any other country has. The virus first emerged there late last year and, beginning in mid-January, authorities shut down much of central Hubei province, with a population of nearly 60 million, and enforced a strict, roughly two-month-long shutdown of all but the most essential commercial activity.
"The nature of this shock is really different than anything we've ever seen in our lifetimes," said Andrew Tilton, chief Asia Pacific economist for Goldman Sachs. On an annualized basis, he said, the plunge in first-quarter growth is likely to put China on pace for the deepest hit to its economy in more than four decades.
Even now, China's economy remains in a fragile state of recovery, having lifted many of the restrictions but also enacting new ones, including tightened restrictions on international flights, in a bid to prevent a second wave of imported infections.
While China has shifted its economy toward domestic consumption in recent years, it remains heavily reliant on exports, which have faced a raft of challenges this year. Gnarled supply chains have prevented raw materials from reaching the factory floor, while domestic travel restrictions have blocked laborers from returning from the Lunar New Year holiday in late January.
Now, most worrying of all, China's customers in the U.S. and across the West are largely shut, and demand is likely to remain depressed for the foreseeable future.
"It's the biggest challenge to the Chinese and the world economy during peacetime in modern history," said Ding Shuang, head of greater China economic research at Standard Chartered. Unlike previous economic downturns, which developed gradually, Mr. Ding compared the coronavirus shock to "a sudden hit of the pause button."
Economists and analysts have been keeping close tabs on China's economic recovery. One economic research firm, Trivium China, estimates business activity has returned to roughly 83% capacity, up from roughly 70% a month ago but having largely flattened out at around the 80% level.
"That last 20% is going to be harder than all the progress made so far," Trivium's analysts wrote in a note to clients on Thursday.