|China change in food industry indicators, Q1 2020 vs a year earlier|
|Consumer expenditure on food, alcohol, tobacco||2.1|
|Retail food sales by above-scale stores||12.6|
|Online sales of edible items||32.7|
|Food service industry sales||-44.3|
|Primary processing of farm products and foods||-11.1|
|GDP from Primary sector||-3.8|
|Source: China National Bureau of Statistics.|
China's Q1 2020 GDP was down 6.8 percent from a year earlier, the first Chinese GDP decline in decades. All the main indicators of economic activity for Q1 were down more than the topline number. Per capita consumption expenditures were down 12.5 percent, retail sales were down 19 percent, fixed asset investment was down 16.1 percent, and exports were down 10 percent from a year earlier. These year-on-year drops don't account for the loss of gains during Q2-Q4 last year.
Q1 income data indicate that China's wage earners had relatively steady income, while the self-employed were hit hardest by the pandemic shutdown. Average per capita disposable income was up 0.8 percent from a year ago. Wage earnings--accounting for 57 percent of China's household income--were up 1.2 percent from a year earlier, but household business earnings--accounting for 15 percent--were down 7.3 percent. Income from transfer payments rose 6.8 percent and now accounts for 18 percent of income--exceeding the share of income from household businesses. The covid-19 epidemic may be the knockout blow to the army of individual entrepreneurs that drove China's growth in previous decades. Average monthly earnings by rural migrant workers were down 7.9 percent, and the 122.5-million migrant workforce at the end of February was 30 percent smaller than a year ago.
Q1 per capita consumer expenditure was down 8.2 percent from a year earlier. The two biggest chunks of household spending--food, alcohol and tobacco (accounting for 33.6 percent of household spending) and rent and utilities (24.4 percent)--were both up 2.1 percent. Spending in other categories was down in double digits. Per capita expenditure on clothing was down 17.8 percent and even medical spending was down 10.2 percent.
The Bureau reported that real per capita consumer expenditure was down 12.5 percent. However, this "inflation" adjustment is meaningless since the 4.9 percent increase in China's CPI in Q1 2020 reflects mainly a 122.5-percent increase in pork prices. The non-food CPI increased only 1.1 percent from a year earlier. There is essentially no inflation in China, just a doubling of pork prices to ration a 21-percent shrinkage of pork production.
Overall retail sales in China were down 15.8 percent in Q1 2020 from a year earlier, but the food service component plummeted 44.3 percent. Sales by "above scale" supermarkets, meanwhile, were up 1.9 percent and food sales by "above scale" stores were up 12.6 percent year-on-year. In contrast, department store sales were down 34.9 percent and specialty shop sales were down 24.7 percent.
Overall, online sales of physical goods were up 5.9 percent. Online purchases now account for 23.6 percent of China's retail sales, up 5.4 percentage points from a year ago, according to the Statistics Bureau. Online sales of edible items during Q1 2020 were up 32.7 percent from a year earlier, while online clothing sales were down 15.1 percent.
On the food production side, the pork shortage and the closure of most slaughterhouses during the epidemic are major factors in the data for Q1. During the press conference, a State T.V. reporter asked a softball question about whether the 3.2-percent decline in Q1 2020 "primary sector" GDP meant trouble for the food supply. The statistics bureau spokesman said the agricultural figure reflected mainly a 21.7-percent year-on-year decline in pork output reported for Q1 before launching into his talking points on food security and recovery of pork production.
China's farm producer price index for Q1 showed a whopping 39 percent increase from a year ago, but this number also is distorted by the hog shortage. Producer prices for hogs were up 133 percent from a year ago, cattle prices were up 17.5 percent, and sheep prices were up 10.7 percent. However, farm prices for rice, wheat, poultry, eggs, fish, and fruit were down from a year ago.
The statistics bureau's fixed asset investment data show a 13.8-percent decline in primary industry investment during Q1 2020 compared with a year ago. In comparison, industrial sector investment fell 21.9 percent and services investment fell 13.4 percent. The primary sector attracted just 2 percent of all fixed asset investment, less than half its 4.9-percent share of GDP during Q1 2020. Investment in agricultural processing was down 32.8 percent and investment in food manufacturing was down 29 percent. Textile industry investment was down 37 percent, the steepest decline of any sector.
In the bureau's manufacturing output data for above-scale firms, agricultural processing output during Q1 2020 was down 11.1 percent from a year earlier, a figure that also probably largely reflects shrinking swine slaughter. (This figure seems surprisingly robust since most slaughterhouses appear to have been shut for more than a month.) Food manufacturing output was down 7.9 percent, close to the 8.4-percent year-on-year decline in overall manufacturing output. Food manufacturing utilized 61.4 percent of its capacity during Q1, lower than in most other sectors and down 12 percentage points from a year earlier.
The statistics bureau spokesman emphasized signs of a rebound in production during March, but acknowledged that demand remains relatively weak and manufacturers are not getting many orders with the pandemic spreading around the world. The official emphasized the key role of consumption in reviving the economy, commenting that peoples' desire for a better life is "irreversible." This gives consumption growth great potential, the official said. As production recovers, income growth will spur consumption, but the official acknowledged that numerous factors influence consumption. He predicted that recent policies would spur growth in consumption.