China Dec manufacturing contracts sharply as COVID infections soar

BEIJING (Reuters) – Factory activity in China fell for a third month in a row in December, to nearly three months, as the novel coronavirus swept production lines across the country after the Chinese government abruptly backed down on anti-virus measures. It was the fastest pace in years.

The National Bureau of Statistics (NBS) said on Saturday that the official Purchasing Managers Index (PMI) fell to 47.0 from 48.0 in November. Economists polled by Reuters had expected the PMI to reach 48.0. The 50 point mark distinguishes contraction and growth on a monthly basis.

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

The data provided the first official snapshot of the manufacturing sector after China lifted the world’s toughest COVID restrictions in early December. The cumulative number of infections likely reached 18.6 million in December, estimates UK-based health data company Airfinity.

Analysts said the surge in infectious diseases could cause temporary labor shortages and increased supply chain disruptions.Reuters reported Wednesday that Tesla (TSLA.O) will cut production at its Shanghai factory The company reportedly plans to extend the production cuts that started in January until next year.

Amid rising interest rates, fears of a global recession growing, and external demand weakening, conflict and inflation in Ukraine will further slow China’s exports, hurting its giant manufacturing sector and hurting the economy. May interfere with recovery.

“Most of the factories I know are far below the likelihood that next year’s orders will be at this time of year. ,” said Cameron Johnson, partner at Tidalwave Solutions, a supply chain consulting firm.

“So even though China is opening up, manufacturing will still slow down as the rest of the global economy slows. Factories have workers but no orders.”

According to NBS, 56.3% of manufacturers surveyed reported being significantly affected by the epidemic in December, an increase of 15.5 percentage points from the previous month, although most expect the situation to gradually improve. said that

hope of recovery

Zhou Hao, chief economist at securities firm Guotai Junnan International, said: “(Factory PMI) was lower than expected, but given the uncertainty of the virus over the past month, it is difficult for analysts to make reasonable forecasts. is really difficult,” he said.

“Overall, we believe the worst for the Chinese economy has passed and a strong economic recovery lies ahead.”

The country’s banking and insurance regulators pledged this week to step up financial support for small and private businesses in the catering and tourism sectors hit hard by the COVID-19 outbreak, making a recovery in consumption a priority I emphasized that

The non-manufacturing PMI, which looks at service sector activity, fell to 41.6 from 46.7 in November, marking its lowest level since February 2020.

The official composite PMI for manufacturing and services combined fell to 42.6 from 47.1.

“In the weeks leading up to Chinese New Year, people are afraid of contagion and don’t want to go out or spend more than necessary,” said Mark Williams, chief Asia economist at Capital Economics. The situation will continue to be tough for the sector.

“However, by the time people return from the Chinese New Year holiday, the outlook should be brighter. Infections have declined and most people have recently contracted COVID and will feel somewhat immune. ”

Reporting by Ryan Wu, Joe Cash and Ellen Zhang.Edited by Sam Holmes and Kim Coghill

Our standards: Thomson Reuters Trust Principles.

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