(Beijing) — The China’s manufacturing and service activities contracted simultaneously in March for the first time since the height of the country’s covid-19 outbreak in 2020, making a more urgent increased political intervention for stabilize the economy.
The official Purchasing Managers’ Index (PMI) for the manufacturing sector fell to 49.5 from 50.2 in February, the National Bureau of Statistics (NBS) said on Thursday, while the non-manufacturing PMI fell to 48.4 from 51.6 in February.
The last time both PMIs were simultaneously below the 50-point mark that separates contraction from growth was in February 2020, as authorities scrambled to stop the spread of the coronavirus, first detected in the central city. China from Wuhan.
The world’s second-largest economy accelerated in January-February, with some key indicators beating expectations, but is now at risk of a sharp slowdown as authorities restrict output and mobility in covid-hit cities including Shanghai. and Shenzhen.
“Recently, epidemic outbreaks have occurred in many places in China, and together with a significant increase in global geopolitical instability, the production and operation of Chinese enterprises have been affected,” said Zhao Qinghe, chief statistician with the NBS. .
The Covid-19 shutdown in Shanghai has disrupted auto production in recent days, as two major suppliers have joined Tesla in closing plants to comply with measures to control the spread of the coronavirus.
“The PMI weakened as omicron outbreaks in many Chinese cities led to lockdowns and disruptions in industrial production,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
“As the Shanghai lockdown only occurred at the end of March, economic activities are likely to slow down further in April.”
A police officer stands guard next to a bridge leading to the Pudong area of Shanghai, now in a lockdown due to covid-19.
The manufacturing sub-index fell below the 50-point mark for the first time since October, to 49.5, signaling a contraction. The new orders indicator was also in negative territory.
“Due to the epidemic outbreaks, some enterprises in certain areas temporarily reduced or stopped production, which also affected the normal production and operation of enterprises in the production and distribution chain,” Zhao said.
Some companies also saw overseas orders canceled or reduced due to geopolitical uncertainties, Zhao said.
Weakening output and demand accelerated the contraction in factory jobs, with the employment sub-index slipping to 48.6 in March, the lowest since February 2021.
The worst since Wuhan in China
“The PMIs probably understate the hit to activity last month,” said Julian Evans-Pritchard, senior China economist at Capital Economics.
“The services index remained above the low of 45.2 reached last August during the delta surge. This is probably because the survey was conducted before the worst disruptions.”
To cushion the impact of the new closures due to covid-19, the authorities have announced support measures for companies, including rent exemptions for some small companies in the service sector.
On Wednesday, the government said it will put in place policies to stabilize the economy as soon as possible amid mounting pressures.
The central bank, which left its benchmark interest rate for lending to businesses and households unchanged in March, is expected to cut rates and lower reserve requirements for banks as downward economic pressures mount. according to analysts.
China’s official composite PMI, which combines manufacturing and services, stood at 48.8 in March, down from 51.2 in February.
The Composite PMI was at its second lowest reading on record since February 2020, when the initial Covid-19 outbreak caused the index to plunge to 28.9.
“This suggests the economy is contracting at its fastest rate since the height of the initial Covid-19 outbreak in February 2020,” Evans-Pritchard said.
