China’s factory activity last month shrank for the second month in a row, official data showed yesterday, as the sector was hit by strict “zero COVID-19” restrictions and extreme heat.
The purchasing managers’ index (PMI), a key gauge of manufacturing in the world’s second-biggest economy, came in at 49.4, up from July’s 49, but still below the 50-point mark separating growth from contraction, Chinese National Bureau of Statistics data showed.
Sporadic COVID-19 lockdowns around China have dampened consumer enthusiasm and business confidence, while searing temperatures across large parts of the country this summer prompted power rationing for factories.
Photo: Reuters
Bureau senior statistician Zhao Qinghe (趙清河) said in a statement that the data showed “the recovery of manufacturing production and demand still needs to be strengthened,” although he added that there was an uptick in activity in agricultural product processing and food producers ahead of the Mid-Autumn Festival on Sept. 10.
China’s manufacturing PMI has been in contraction territory for five out of the past six months, in the wake of a disruptive months-long lockdown in Shanghai and COVID-19-related restrictions elsewhere.
Officials show few signs of relaxing strict pandemic curbs, with the southern tech hub of Shenzhen sealing off the world’s largest electronics market this week despite just dozens of daily cases in the city of more than 18 million, while Guangzhou yesterday imposed COVID-19 curbs in parts of the city, even though the city of nearly 19 million reported just five locally transmitted infections for Tuesday.
Capital Economics said that 41 cities, responsible for 32 percent of China’s GDP, are in the midst of outbreaks — the highest number since April.
“For now, the resulting disruption appears modest, but the threat of damaging lockdowns is growing,” Capital Economics senior China economist Julian Evans-Pritchard said. “And even if they are avoided, we expect growth to remain subdued going forward.”
Zhao said that while larger businesses saw an expansion in activity last month, small and medium-sized enterprises reported contractions, dragging the overall PMI down.
“China’s economic weakness is increasingly becoming demand-driven,” Australia & New Zealand Banking Group Ltd chief economist for Greater China Raymond Yeung (楊宇霆) said. “Consumption and investment sentiment among households and enterprises are weak, increasing the risk of a deflationary spiral.”
China’s nonmanufacturing PMI came in at 52.6 points last month, down from 53.8 in July, bureau data showed.
Zhao said that the accommodation, food and beverage, and telecommunications industries saw “sustained rapid growth” in the month.
Yeung said that weak expansion in the service sector “bodes ill for China’s overall growth outlook.”
He said authorities were likely to continue their tough COVID-19 approach in the lead-up to a key political meeting next month — the 20th Chinese Communist Party Congress.
Additional reporting by Reuters
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