The Delta variant in China is just one of the clouds hanging over the economy

“The spread of the virus and natural disasters have affected the economy in some regions and the economic recovery is still unstable and uneven,” Fu Linghui, a spokesman for the National Bureau of Statistics (NBS), said at a news conference in Beijing on Monday. coronavirus, catastrophic flooding swept through central China last month, killing more than 300 people. The widespread damage and disruption also resulted in direct economic losses totaling nearly $21 billion, according to government statistics released this month.

According to government data, youth unemployment rose to 16.2% in July. That is the highest percentage in a year.

The virus outbreak, along with disruptions caused by: severe flooding in central China, “appears to have somewhat disrupted the recruitment of recent graduates,” Evans-Pritchard added in a research note Monday.

Fu of the NBS says a number of factors are contributing to the pressure on the labor market. More than 9 million new graduates are looking for a job in China this year. And because of the pandemic, many students who studied abroad have returned home to look for work.

Persistent supply bottlenecks and tighter credit conditions have heightened concerns about economic growth. Infrastructure spending was particularly weak as the authorities withdrew the fiscal support.

“Tighter restrictions on developer borrowing seem to be taking some of the heat out of real estate investment,” Evans-Pritchard added.

Auto production underperformed the major industrial sectors, contracting 8.5% in July compared to a year earlier. This was mainly due to the persistent chip shortage, says Iris Pang, chief economist Greater China at ING.

Production of computers, telecommunications equipment and other electronic products is also likely to slow in the coming months due to chip supply issues, Pang added.

There are more challenges for the Chinese economy. Last week, authorities closed a terminal in the port of Ningbo-Zhoushan, the world’s third largest container port, after a dock worker tested positive for Covid. The port handles goods that would fill about 78,000 20-foot containers each day, and the terminal that was closed accounts for about one-fifth of the port’s volume.

“This will have a negative effect on the import and export activities around Shanghai”, she said. “We expect the congestion at the terminals to take several months to clear.”

Evans-Pritchard, meanwhile, said he expected spending to pick up again now that the virus is back under control and restrictions are lifted in China.

But he anticipated the slowdown will deepen elsewhere, as the People’s Bank of China is likely to continue to contain credit growth.