Transport data, Grocery service shutdown, Restaurant support measures

Transportation data shows sharp declines in June

Data from China’s Ministry of Transportation showed sharp drops in June even as most cities were coming out of lockdowns and easing restrictions. The data is typically published mid-month, however the June data was delayed and only posted on Friday morning.

Passenger traffic within cities, which includes modes such as the metro, buses, and taxis dropped 22.1% y/y.

Road freight volumes were down 4.6% y/y while road passenger traffic declined by 33.0%.

Volumes at ports were down 0.8% y/y in tonnage terms but foreign trade volumes, measured in TEU, rose by 3.0% y/y.

Ports have generally been more insulated against the effects of the covid lockdowns, as most ports have “closed loop” operations with employees and staff staying on site for long periods.

Sharp drops in passenger volumes both on highways and within cities illustrates the economic stresses caused by the zero covid policy. Daily cases have been declining from their recent peak, but China reported another 450 cases spread across 12 provinces on Thursday.

Grocery delivery service shutters amid higher retail grocery spending

Missfresh, a NASDAQ-listed food delivery service, said it was suspending operations due to financial stress. The stock fell over 40% to close at just 14 cents per share, down from nearly $10 a year ago.

Other competitors in the food delivery space have also struggled this year. In January, competitor Maicai denied rumors of layoffs, but in May ended operations in smaller cities. The company also saw its stock fall nearly 10% to $4.81 on Thursday, down from a peak of $37.37 per share in November.

The financial stress of grocery delivery companies is also surprising as it comes during a time when retail spending on groceries is up, and restaurant spending is down, as more consumers stay home due to covid worries.

The increase in at-home consumption is also evident in disclosures of publicly listed food companies. Haixin Foods, a maker of snacks and seafood products, reported its revenue grew 0.27% in the first half of the year. Income from snack products rose 6.49%, but income from frozen pre-made dishes rose 1,216% as consumers increasingly opt for convenient at-home meals instead of visiting restaurants.

New measures to stimulate restaurant spending

Shaanxi province announced it would issue 70m yuan ($10.4m USD) in coupons to stimulate the region’s tourism and restaurant sector.

In an announcement, the provincial government said it would also crack down on “excessive epidemic prevention” which led to “arbitrary” closures of restaurants and retail outlets.

Shaanxi is the latest local government to issue vouchers to boost the economy in the absence of any large-scale central government stimulus.

This stimulus for the restaurant industry comes despite Shaanxi not seeing any major covid outbreaks. In the past three weeks, the province of 37 million, never saw daily covid cases exceed 5 per day.

While lockdowns weigh on restaurant and food demand, 2022 has seen a pronounced shift in behavior where consumers continue to avoid restaurants even in the absence of covid outbreaks. This is likely due to a combination of factors including worries about covid exposure and consumers spending less as the economy slows.

In a press conference on Friday, a spokesperson for the Ministry of Commerce reported that during the Dragon Boat holiday in late June, the number of domestic tourists was 80% of pre-covid levels, but the amount of tourist spending was only 60% of pre-covid levels.

In a separate statement, the China Banking and Insurance Regulatory Commission said it would focus on ensuring financing for restaurants in the second half of the year.

This decline in restaurant spending is a net negative to agricultural demand and will continue to be a headwind for protein consumption.