China December factory activity extends declines on COVID surge – Caixin PMI

BEIJING (Reuters) – Factory activity in China contracted at a steep pace in December. That’s because the surge in coronavirus infections has disrupted production and weighed on demand after Beijing lifted a slew of virus-fighting restrictions, a private-sector survey showed Tuesday.

The Caixin/Markit Manufacturing Purchasing Managers Index (PMI) fell to 49.0 in December from 49.4 in November. The index has been below the 50 point that separates growth from contraction for the fifth straight month.

It was the lowest reading since September but beat analysts’ expectations of 48.8 in a Reuters poll.

China’s larger official PMI survey, released on Saturday, showed activity indicators fell sharply to their lowest level in nearly three years. Caixin’s research focuses on small export-oriented companies.

The figures provide a snapshot of the challenges facing Chinese manufacturers as they battle a surge in infections after the sudden shift in COVID policy in early December.

“Supply is shrinking, aggregate demand is still weak, foreign demand is shrinking, employment is deteriorating, logistics is stagnating and manufacturers are under increasing pressure on profitability,” said Wang Zhe, senior economist at Caixin Insight. “In the face of the group.

Weakening external demand due to slowing global growth continues to weigh on orders from export-oriented producers, with the Caixin new export orders sub-index contracting at its fastest pace since September.

Supplier deliveries were delayed for the sixth month in a row due to logistics slowdowns, and manufacturing sector employment fell for the ninth straight month due to lower production levels and difficulties in sourcing workers due to the virus outbreak.

However, manufacturers were somewhat optimistic as the future production sub-index surged to its highest level since February as coronavirus restrictions were withdrawn.

Some analysts expect increased labor shortages and supply chain disruptions, combined with weaker customer demand, could push winter production down even further, even as travel restrictions ease. I’m here.

“With the coronavirus at zero, the market expects a dramatic recovery in 2023,” said Derek Scissors, chief economist at China Beige Book.

“Eventually it will. But with the ongoing COVID wave, investment dropping to 10-quarter lows and new orders continuing to take a hit, a meaningful Q1 recovery will likely be more It’s getting more unreal.”

But Sina Yue, China economist at Capital Economics, said both the official PMI and the Caixin PMI didn’t read much of the direct significance.

Referring to the large-scale migrations that take place each year around the Chinese New Year, Yue said, “Meanwhile, next spring’s move is likely to see the spread of the virus spread to more rural areas, further straining the service sector. ‘ said. holiday.

Caixin service PMI values ​​for December will be released on Thursday.

Chinese leaders have pledged to step up policy coordination to mitigate the impact of a surge in COVID infections on businesses and consumers at a time when a weakening global economy is hurting exports. did.

China, the world’s second largest economy, is expected to grow by 3% in the first nine months of 2022 and maintain that growth rate for the full year. This is his one of the worst years in almost half a century.

Reporting by Ellen Zhang and Ryan Wu.Edited by Sam Holmes

Our standards: Thomson Reuters Trust Principles.

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