Chinese manufacturing and service activity was close to declining in January, official data showed as the country’s zero-Covid strategy amplifies a downturn in the real estate sector.
China’s purchasing managers’ index in production was 50.1 in January, up from 50.3 a month earlier and held just above the 50-point threshold, indicating expansion rather than contraction, according to the National Bureau of Statistics.
A separate independent measure of factory activity reflected that the decline is worse among smaller producers affected by weakened export demand. Caixin manufacturing PMI fell to a low of 49.1 from 50.9, near its lowest point since the start of the pandemic.
“From December to January, Covid-19’s resurgence in several regions, including Xi’an and Beijing, forced local governments to tighten epidemic controls that restricted the production, transportation and sale of manufactured goods,” said Wang Zhe, senior economist at Caixin Insight Group. .
“It became clearer that China’s economy was under pressure under the triple pressure of declining demand, supply shock and weakened expectations.”
The official NBS non-manufacturing index, which consists of the service and construction sectors, was still in the expansion range of 51.1. but down from 52.7 a month earlier. The decline highlighted the framework for local consumption activity from the shutdowns in several major Chinese cities as well as travel restrictions.
The reports showed problems caused by worsening supply chain delays and rising inflation in the world’s second largest economy.
For Beijing’s economic planners, Sunday’s PMI release underscores persistent unemployment.
“The employment target fell to its lowest level since April 2020, marking its sixth consecutive month in contractionary territory,” said Caixin’s Wang Zhe.
Goldman Sachs analysts noted that “high-contact consumer services, including accommodation and transportation, were below [the 50 point marker] due to local outbreaks in January. ”
The latest data on China’s economy came two weeks after the country’s gross domestic product grew 4 percent year-on-year in the fourth quarter. It marked a decline from 6.5 percent growth over the same period in 2020 and the slowest pace of year-on-year growth in nearly 18 months.
The downturn has prompted a number of monetary and political easing in recent weeks as Beijing seeks to minimize security damage from a property crisis as well as address the effects of restrictions imposed to curb the spread of coronavirus.