China says its economy shrank by 6.8% in the first quarter as the country battled coronavirus

China reported Friday that its first quarter GDP contracted by 6.8% in 2020 from a year ago as the world’s second largest economy took a huge hit from the coronavirus outbreak, data from the National Bureau of Statistics of China showed.

The contraction in the first quarter is the first decline since at least 1992, when official quarterly GDP records started, according to Reuters. China’s government figures are frequently doubted by analysts.

Analysts polled by Reuters had predicted China’s GDP would shrink by 6.5% in the January to March quarter, compared to a year ago. The forecasts from 57 analysts polled ranged from a 28.9% contraction to a 4% expansion. China’s economy grew 6% in the last quarter of 2019.

Here are some of the key figures released Friday, on a year-over-year basis:

• Industrial production dropped 8.4% in the first quarter, and marked a 1.1% decline in March.
• Fixed-asset investment fell 16.1% in the first quarter. 
• Retail sales fell 19% in the first quarter. Sales of consumer goods fell 15.8% in March, while online sales of physical goods rose 5.9%.

The urban unemployment rate in March was 5.9%, according to the government’s survey. That’s down from a record high of 6.2% in February, data from the statistics bureau showed.

Employment is a national priority and is stable overall, but the pressure on jobs is still considerable due to canceled orders, Mao Shengyong, a spokesman for the National Bureau of Statistics, said Friday at a press conference, according to a CNBC translation of his Mandarin-language remarks. 

China is facing tremendous pressure amid increasing uncertainties and instabilities from the coronavirus outbreak, Mao said, adding the country is also facing new difficulties and challenges in resuming work and production.

More than half of China extended a Lunar New Year holiday by at least a week in an effort to blunt the spread of the virus. Nearly all major industrial enterprises have resumed work, while the return-to-work rate for smaller businesses has topped 80%, according to official reports.

However, business activity is still not back to normal, especially in the services industries, and the spread of the virus overseas has led to a drop in demand for China’s exports. 

Looking ahead, Mao said he expected China’s economic growth to improve. He pointed out that data for March was better than that of the first two months of the year, and a continuation of that trend would likely result in better data for April, and the second half of the year. 

But at least one analyst called for caution.

Better data in March could be misleading since it was only then that factories were able to re-open and fulfill some orders from February, said Bo Zhuang, chief China economist at TS Lombard. 

“What is really important was that before March, everybody was expecting China to have a V-shaped recovery because it was actually (about) China supply disruption (initially), but now we are seeing this demand shock,” Zhuang told CNBC. “The internal demand shock was massive. That tells us that after coronavirus, even after the lockdowns have been lifted, people are cautious to consume. Shopping malls are open but they are not consuming, and that is the key.”

Such a “false dawn” could become apparent soon, Zhuang said, noting that since the virus began to spread around the world in mid-March, demand from rest of the world for Chinese goods has dropped. He expects China’s industrial production and exports to worsen in April or May.

The latest data comes after exports fell sharply in January and February compared to a year ago, and manufacturing activity plummeted. There has been some recovery in March.

Mao said that given the International Monetary Fund’s projections for the next two years, it’s likely that China’s economy can grow by more than 5% this year and next. He declined to share details on an annual economic growth target, which Beijing usually sets at a major annual meeting in early March. This year, the meeting has been postponed to an unspecified date due to the coronavirus.

A separate Reuters poll showed China’s GDP growth is expected to slow sharply to 2.5% in 2020 from 6.1% in 2019.

The coronavirus disease, officially called Covid-19, emerged in late December in the Chinese city of Wuhan and has killed thousands of people in the country. While the spread of the virus has stalled domestically, the disease has turned into a global pandemic in recent weeks, killing more than 144,000 people.

Concerns about the impact of the virus to major economies has roiled global financial markets with fears of a recession.