December manufacturing in China contracts sharply as COVID infections soar

Oliver2022-12-31

BEIJING — Chinese factory activity shrank for the third straight month in December and at the fastest pace in nearly three years as COVID infections swept through production lines after anti-virus measures were abruptly eased. by Beijing.

The official Purchasing Managers’ Index (PMI) came in at 47.0 from 48.0 in November, the National Bureau of Statistics (NBS) said on Saturday. Economists in a Reuters poll had expected the PMI to come in at 48.0. The 50 point mark separates contraction from growth on a monthly basis.

The decline was the largest since the early days of the pandemic in February 2020.

The data offered the first official snapshot of the manufacturing sector after China scrapped the world’s toughest COVID restrictions in early December. Analysts said the surge in infections could lead to temporary labor shortages and increased supply chain disruptions, further weighing on economic activity in the months ahead.

The dismantling of anti-virus rules was welcomed by businesses although it disrupted operations. Reuters reported on Wednesday that Tesla plans to run a reduced production schedule at its Shanghai factory in January, extending the reduced production started this month into next year.

Weakening external demand due to growing fears of a global recession amid rising interest rates, inflation and war in Ukraine could further slow China’s exports, hurt its massive manufacturing sector and hamper economic growth. economic recovery.

Some companies try to minimize

disturbance

s by dividing their remaining healthy staff into two shifts, with only one shift working a particular shift, or by maintaining a closed-loop system in their factories and surrounding compounds.

After three years of zero tolerance measures, from closed borders to frequent closures, the world’s second largest economy has announced that from January 8 the country

Stop

requiring incoming travelers to self-quarantine.

The move raised hopes that the country’s billions of dollars

business trip

will soon bloom again, but countries yearning for Chinese tourists to return will likely have to wait longer.

The non-manufacturing PMI, which examines service sector activity, fell to 41.6 from 46.7 in November, according to BNS data, also marking the lowest reading since February 2020.

The official composite PMI, which combines manufacturing and services, fell to 42.6 from 47.1.

The country’s banking and insurance regulator pledged this week to boost financial support for small businesses and private businesses across the country.

catering and tourism sectors

which have been hit hard by the COVID-19 outbreak, stressing that a recovery in consumption will be a priority.

But analysts expect the economy to struggle through the winter months as much of the population is infected and unable to work while recovering.

The official manufacturing PMI mainly focuses on large companies and public companies. The private sector Caixin manufacturing PMI, which focuses more on small businesses and coastal regions, will be released on January 3. The Reuters poll predicted it would be 48.8. (Reporting by Ryan Woo, Joe Cash and Ellen Zhang; Editing by Sam Holmes and Kim Coghill)

financialpost

Oliver2022-12-31