We are experiencing the most serious rebound of the epidemic since March 2020, and the impact on consumption will become another major problem of steady growth. No matter from the number of newly diagnosed and asymptomatic infections, the number of medium and high-risk areas or the economic weight of the hardest hit areas, the impact of this round of epidemic outbreak is not optimistic, and consumption will bear the brunt under “dynamic clearing”. Investment is entrusted with the task of stabilizing growth in 2022, but if consumption has a negative growth in the first quarter, it will undoubtedly make the goal of “5.5%” more difficult.
What is the scope of the epidemic? As of March 13, 2022, Omicron has caused a noteworthy rebound in the epidemic situation in 14 provinces and 20 cities and counties (more than 10 people have been diagnosed or asymptomatic infected). We have counted the proportion of the above-mentioned cities and counties’ social zero in the total social zero in the country, so as to evaluate the impact of the epidemic rebound on consumption in the following.
According to our calculation, in 2020, the social zero of the above 20 cities and counties accounted for 17.5% of the national social zero, of which Shanghai, Shenzhen, Hangzhou, Tianjin, Qingdao and Quanzhou accounted for nearly 12%. The social zero of the above 14 provinces accounts for 57.5% of the national social zero.
How big is the impact of the “clearing policy” on consumption? Looking back on the repeated outbreaks and zero consumption changes in some typical cities since 2020, we take the congestion delay index as a measure of the intensity of urban blockade, and divide the impact of the epidemic on consumption into three situations: mild, moderate and severe:
Mild control: Guangzhou (May to June 2021), Nanjing (July to August 2021): during the outbreak in mid-2021, Guangdong and Nanjing mainly controlled public places in key areas without expanding the blockade. In terms of social retail, Guangzhou shrank by 1.4% year-on-year in June (compared with the average contraction of 2.5% in 2019), and Nanjing shrank by 22.8% year-on-year in August (compared with the average contraction of 3.3% in 2019).
Moderate control: Beijing (June to July 2020): covid-19 epidemic broke out in Shenzhen Agricultural Products Group Co.Ltd(000061) market in Xinfadi, Beijing in June 2020. Due to the short time before the outbreak at the beginning of the year, the government adopted very strict control policies, including strict closed management for all communities. In June and July, the total amount of social consumer goods in Beijing fell by – 8.2% and – 11.5% year-on-year.
Severe control: Xi’an (December 2021 to January 2022): the imported epidemic in Xi’an broke out on December 9. Xi’an entered the state of closure on December 23 and was not fully unsealed until January 24, 2022. From the congestion index, Xi’an’s economic activities shrank significantly during the period, and the retail sales of consumer goods above the quota decreased by 44.2% year-on-year in December (compared with the average contraction of 22% in 2019).
Summing up the experience of epidemic rebound in the past, we find that:
In terms of time, the strict implementation of the policy of dynamic clearing can often control the time of the outbreak of the epidemic in about one month, but it often takes about two months for urban traffic recovery and consumption to return to positive growth.
In terms of impact amplitude, the monthly year-on-year growth rate of consumption in mild, moderate and severe cases was – 3%, – 10% and – 22% respectively. Among them, the impact of catering consumption is significantly greater than that of commodity sales.
What do you think of the growth rate of consumption in the first quarter? At present, Shanghai is still under mild control, but Shenzhen, Shandong Zibo (Huantai County) and other places have begun to evolve to a moderate situation. We assume that the significant impact of the epidemic on consumption is mainly concentrated in March, and there is a trade-off between the spread of the epidemic and the degree of control, that is, the stricter the control, the less likely the spread. In the first quarter, the social zero growth rate may fall back to 1% to 3%. Of course, in extreme cases, the corresponding social zero growth rate may turn negative if the control is not strengthened after the diffusion due to the untimely control.
It is worth noting that our calculations may overestimate the decline in final consumption to some extent. The main reason is that social zero consumption ignores most of the service consumption, especially the government related service consumption, including the public health and medical services that may be increased during the epidemic control period.
Risk tip: the spread of the epidemic exceeded expectations, and the effect of policy hedging against the economic downturn was less than expected
