China reports economy worse than expected

— China’s consumer spending and factory activity fell more than expected in January and February as it fought a virus outbreak, prompting forecasters to warn this year’s economic growth might slump to its lowest level since the 1970s.

Retail sales fell 20.5% from a year ago after shopping malls and other businesses were closed in late January, government data showed Monday. Factory output declined by a record 13.5% after the Lunar New Year holiday was extended to keep manufacturing employees at home.

The unexpectedly bleak figures suggest the world’s second-largest economy is shrinking despite the ruling Communist Party’s efforts to revive manufacturing and other industries, some forecasters said.

“This is not the end of the nightmare. Watch out!” wrote economist Iris Pang of ING in a report.

ING cut its forecast of this year’s economic growth to 3.6%, which would be the weakest since at least the 1970s, before market-style reforms set off China’s boom. It would exceed 1990’s low of 3.9% following the crackdown on the Tiananmen Square pro-democracy protests.

In the current quarter, activity might contract by as much as 6% from a year ago, the weakest in at least five decades, said Larry Hu of Macquarie Capital. Others said they expect a contraction this quarter but gave no figures.

Beijing is trying to head off a deeper downturn, which would raise the risk of politically dangerous job losses.

Authorities have eased some of the controls that idled factories and closed shopping malls, restaurants and other businesses and left city streets empty and eerily silent for weeks in an effort to contain the coronavirus that emerged in central China in December.

The government has cut interest rates and is promising tax breaks and other aid, especially for small, private companies that are China’s economic engine.