China’s slump

China’s economic slump is worse than expected after Shanghai and other cities shut down to fight virus outbreaks, though activity may be improving.

The second-biggest economy may shrink by up to 1% over a year earlier in the three months ending in June even as anti-virus curbs ease, forecasters say. They cut growth forecasts for 2022 to as low as 2%. The official target is 5.5%.

Retail sales plunged 11.1% in April from a year ago. Factory output was off 2.9%. All were “worse than expected,” Iris Pang of ING said in a report.

The bleak outlook is politically awkward in a year when President Xi Jinping is expected to break with tradition and award himself a third five-year term as the ruling Communist Party’s leader.

Beijing is avoiding its usual strategy of igniting a real estate boom. Leaders don’t want to inflate debt and housing costs.

In a positive sign, power demand and freight grew in May, the government says. But leaders say fighting the virus is their priority. That means more disruption if there are further outbreaks.