(Bloomberg] — Chinese industry firms saw their profits fall last month due to Covid outbreaks, lockdowns, and disruptions in factory production, transport logistics, and sales.

According to data released Friday by the National Bureau of Statistics, industrial profits dropped 8.5% from last year. It’s the worst performance since April 2020.

The latest outbreak has seen factories struggle due to the prolonged lockdown in Shanghai. This important port city is located at the center of the Yangtze River Delta, which is a key economic and political hub. The government announced earlier this month that April saw an unexpected drop in output. This was the largest monthly decline of output since 1990. It is a clear sign that the Covid curbs on activity were paralyzing.

“Profits were under obvious short-term pressure in April,” NBS senior statistician Zhu Hong said in a statement accompanying the Friday data. Agency attributed the decline to Covid epidemics that occurred frequently and occasionally, which had an impact on production and operations.

According to Bloomberg calculations, which were based on data from the National Bureau of Statistics, this profit decline was more severe than March’s. March profits rose by about 14%. The profit growth in the first 4 months of this year was 3.5%. This is less than the 8.5% gain experienced in the 1st quarter. 

In the period January to April, profits at foreign Chinese industrial businesses fell 16.2%. While profits for private companies fell by 0.6%, those of state-owned enterprises saw an increase in profit growth of 13.9%.

Manufacturers in and around Shanghai have reported difficulties in keeping factories operational even while using a “closed-loop system” in which workers live on site and test frequently. Some areas were almost paralyzed by logistics, which created bottlenecks in transportation and supply chains.

Bloomberg Economics Says…

“The longer the pressures lasts, the greater the impact on employment and investment will be. A number of government support measures have been implemented. It will depend on how long lockdowns continue to be in place. Without looser restrictions, the economy is unlikely to respond much to additional stimulus.”

— David Qu, economist

The full report is available here

As Shanghai takes steps toward gradual reopening, daily operations at the city’s port have almost fully recovered from the effects of the city’s Covid-19 lockdown. The backlog caused by disruptions at the port and near factories will continue to affect shipping traffic well into 2019, causing further congestion.

Updates with charts and quotes from economists

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