China’s Economy Showing Signs of Strain From COVID Resurgence

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China’s economy continued to slow in December as the massive Covid-19 outbreak spread across the country, with activity slumping as more people stay home to try and avoid getting sick or to recover.

Bloomberg’s aggregate index of eight early indicators showed a contraction in activity in December from an already weak pace in November and the outlook is grim for the new year.

Although there’s no reliable data on the extent of the spread of the virus or the number of sick and dead now, it had reached every province before the end of extensive and regular testing. The virus is now free to circulate in the country thanks to the lifting of most domestic restrictions.

Even before the curbs were lifted, China’s economy was struggling, with a slump in consumer spending deepening and industrial output growing the slowest since the spring lockdowns.

It was worse for restaurants and shops in Beijing than across the country, with retail sales dropping nearly 18% in November due to both capital restrictions and cases.

However even though people are now free to move around there’s been little rebound in movement so far this month, according to high-frequency data on subway and road usage.

The 3.6 million trips made on the Beijing subway last Thursday were 70% below the level on the same day in 2019, and traffic congestion on the city’s streets was only 30% of the level in January 2021, according to BloombergNEF. Similar drops are also being seen in major cities like Chongqing and Guangzhou as well as Shanghai, Tianjin, Tianjin, Wuhan, Guangzhou and Shanghai.

It appears that this is affecting home and car sales, both of which dropped in the first two weeks of February. Car sales had