Chinese production is slowing as Covid’s zero compounds cause property shocks

China’s manufacturing and service activities approached a contraction in January, official figures show, as the country’s strategy for zero Covid leads to a slowdown in the real estate sector.

China’s index of purchasing managers was 50.1 in January, up from 50.3 a month earlier, and simply stays above the 50-point threshold, indicating expansion rather than contraction, according to the National Bureau of Statistics.

A separate independent indicator of factory activity reflects that the decline is worse among smaller producers affected by weakening export demand. Caixin’s PMI fell to its lowest level of 49.1 from 50.9, near its lowest point since the pandemic began.

“From December to January, the resurgence of Covid-19 in several regions, including Xi’an and Beijing, has forced local authorities to tighten epidemic control measures, limiting the production, transportation and sale of industrial goods,” said Wang Je, a senior economist at Caixin. Insight Group.

“It has become more apparent that the Chinese economy is straining under triple pressure from shrinking demand, supply shocks and weakening expectations.

The official non-productive index of the NBS, composed of the services and construction sectors, was still in the territory of 51.1. but a decline of 52.7 months earlier. The decline highlighted the impact on local consumption activity from the blockade in several major Chinese cities, as well as travel restrictions.

Reports show problems caused by worsening supply chain slowdowns and rising inflation in the world’s second-largest economy.

For economic experts in Beijing, Sunday’s PMI press release highlights persistent unemployment.

“The employment measure fell to its lowest level since April 2020, marking the sixth consecutive month of shrinking territory,” said Van Jee of Caixin.

Goldman Sachs analysts noted that “high-contact consumer services, including accommodation and transport, are below [the 50 point marker] due to local outbreaks in January. “

The latest data on the Chinese economy came two weeks after the country’s gross domestic product increased by 4% year-on-year in the fourth quarter. This marked a decline of 6.5% growth over the same period in 2020 and the slowest growth rate on an annual basis of almost 18 months.

The delay has sparked a series of measures to ease monetary and policy policies in recent weeks as Beijing seeks to minimize secured damage from the real estate crisis, as well as counter the effects of restrictions imposed to curb the spread of coronavirus.

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