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New Covid-19 wave in China slows down factory activity

Industries including accommodation and catering saw a "more significant" drop inactivity, while the construction industry went into an off-season.

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Factory activity in China slowed slightly in January, official data showed Sunday, as the country rushed to stamp out a new Covid-19 wave in northern China.

The purchasing managers’ index (PMI), a key gauge of manufacturing activity, came in at 51.3 this month, as the world’s second-largest economy tightened Covid-19 precautions ahead of the Lunar New Year.

The figure was slightly below December’s reading of 51.9, although still above the 50-point mark separating growth from contraction.

“Recently, local clusters of the epidemic emerged successively in many places across the country, and the production and operations of some enterprises were temporarily affected,” said National Bureau of Statistics (NBS) senior statistician Zhao Qinghe.

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Zhao added that the period around the Lunar New Year is traditionally an “off-peak season” for the manufacturing industry.

The latest data indicated that the business climate remains weak for small firms, although domestic consumption picked up ahead of the festive period.

Export demand slowed after Christmas as the pandemic continued spreading worldwide, the NBS added.

China’s non-manufacturing PMI saw a larger drop to 52.4, from 55.7 last month, taking a bigger hit from the domestic virus resurgence.

Industries including accommodation and catering saw a “more significant” drop inactivity, while the construction industry went into an off-season.

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The fall in the PMI reflects weakening growth momentum due to government measures to contain the new Covid-19 wave, including tightening social distancing rules, re-imposing lockdowns, and travel bans in some parts of China, Nomura’s chief China economist Lu Ting told AFP.

“The inevitable, seasonal rise in population mobility and family gatherings in coming weeks, albeit likely much smaller than their pre-pandemic levels, may keep these Covid-19 prevention measures in place for a longer time,” he added.

Accordingly, the non-manufacturing activity could dip further in February, he said.

But with migrant workers encouraged to stay in the cities where they work this year instead of returning home, manufacturing PMI might rebound slightly in the coming month, said Lu.

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