China’s abrupt withdrawal from its zero-coronavirus policy has pushed economic activity, especially the services sector, to its slowest pace since February 2020. This is as the virus swept through major cities, prompting people to stay home and businesses to close.
The official manufacturing Purchasing Managers Index fell to 47 this month from 48 in November, the National Bureau of Statistics said Saturday. That was worse than the 47.8 expected in a Bloomberg poll of economists.
The non-manufacturing index, which measures activity in the construction and services sectors, fell to 41.6 from 46.7 in November, below consensus expectations of 45. Both measurements were at their lowest levels since February 2020.
Services PMI, a sub-index of the non-manufacturing index, fell to 39.4 from 45.1 in November. This is the lowest since February 2020 and the fourth straight month of contraction.
December data reflects the month when the world’s second-largest economy finally ended its long-running Covid-zero policy in a sudden reversal. The continued spread of Covid could create further disruptions to the economy through the first quarter of 2023 and could exacerbate the situation with a potential travel rush during the upcoming Chinese New Year holidays. I have.
China’s economy was in a slump before its pivot from Covid Zero as curbs to prevent the spread of the infection held back economic activity and kept the country isolated from the world. Weak consumer demand and weaker foreign demand for Chinese goods are contributing to the recession, and GDP could grow by just 3% in 2022.
High-frequency data in December suggests that economic activity has been pushed off a cliff.There was even some disruption in government activity.
In a statement accompanying the data release, the statistics bureau said, “Both production and consumption have declined as the COVID-19 situation has had a relatively large impact on businesses, personnel at work and logistics.”
Manufacturing PMI gauges that measure output, new orders and employment all contracted in December at a faster pace than the previous month. A sub-index that measures supplier delivery times also fell further, indicating supply disruptions.
Bloomberg Economics View…
Given the surging infections, the economy will have a tough time in the next few months before the reopening push kicks in in late February or March after the first wave culminates. The data supports our view that further policy support will come as the People’s Bank of China is likely to cut rates in the first quarter of 2023 to stabilize the economy.
— David Ku
Economists see a growing chance of a faster and stronger rebound in the second half of 2023. After a slow start from January to March, growth is expected to bounce back to 4.8% this year, according to the median estimate of economists surveyed. by Bloomberg.
– With help from Winnie Zhu and Jing Li.
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