China's retail sales slumped to its lowest in two years while factory output plunged, official data showed Monday, capturing the dismal economic fallout from Beijing's zero-Covid policy.

The world's second-largest economy has persisted with strict virus measures, choking up global supply chains as dozens of Chinese cities -- including key business hub Shanghai -- grapple with restrictions.

Officials have vowed to support growth, lowering the mortgage rate for first-time homebuyers. While Shanghai's gradual reopening was announced over the weekend, observers warn that the zero-Covid strategy could mute any positive impact.

The latest cut came Monday when the National Bureau of Statistics (NBS) announced data showing that retail sales shrank 11.1 percent on-year in April.

It is the biggest slump since March 2020 as Chinese consumers remained cooped up at home or jittery over lingering restrictions.

"In April, the epidemic had a big impact on economic operations," NBS spokesman Fu Linghui told reporters Monday, adding that the outbreak had a "significantly larger-than-expected" effect.

But he stressed that the hit would be "short-term" and a gradual recovery was on the cards.

Industrial production growth also sank 2.9 percent on-year, reflecting damage from shuttered factories and transportation woes as officials ramped up Covid restrictions last month.

This figure is the weakest since early 2020, and down from 5.0 percent growth in March.

The dismal showing came as China battles its worst Covid outbreak since the early days of the pandemic.

"The prolonged Shanghai lockdown and its ripple effect through China, as well as logistics delays resulting from highway controls... have severely affected domestic supply chains," said Tommy Wu, lead China economist at Oxford Economics.

He added that household consumption was "hit even harder" and disruption to activity could extend into June with a rebound likely to take weeks.

Unemployment rise

In April, unemployment similarly rose to levels not seen since early 2020, according to the data, as the urban unemployment rate hit 6.1 percent.

In a sign of looming concern among authorities, China on Friday announced measures to help young people find jobs -- given that a record number of fresh graduates are expected to enter the market this year.

These include social insurance subsidies for smaller firms that hire more graduates.

State-owned enterprises are also expected to boost recruitment, official Xinhua news agency said.

"Repeated indications from the authorities that meaningful policy easing is on the horizon have not played out," said financial services firm Gavekal in a recent note, adding that policymakers may be waiting for lockdowns to lift before boosting stimulus.

"Yet as Shanghai and Beijing struggle to reopen and the economic damage keeps growing... officials may yet be forced to crank up stimulus sooner," Gavekal said.