The official purchasing managers index (PMI) in manufacturing fell to 49.5 from 50.2 in February, the National Bureau of Statistics (NBS) said Thursday, while the non-manufacturing PMI fell to 48.4 from 51.6 in February. .
The last time both PMIs simultaneously fell below the 50 mark that separates contraction from growth was in February 2020, as authorities sought to stem the spread of the coronavirus, first detected in the central Chinese city of Wuhan.
The world’s second-largest economy rebounded in January-February, with some key indicators beating expectations, but now there is a risk of a sharp slowdown as authorities restrict production and mobility in Covid-hit cities, including Shanghai and Shenzhen.
“Recently, there have been pockets of epidemic outbreaks in many places in China, and combined with a significant increase in global geopolitical instability, the production and activities of Chinese enterprises have been affected,” said Zhao Qinghe, senior statistician at NBS.
“PMI weakened as Omicron outbreaks in many Chinese cities resulted in lockdowns and industrial production disruptions,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
“Since the Shanghai lockdown only happened at the end of March, economic activity is likely to slow down even further in April.”
The manufacturing sub-index fell below the 50 mark for the first time since October to 49.5, indicating contraction. The gauge of new orders was also in negative territory.
“Due to epidemic outbreaks, some companies in some areas have temporarily reduced or stopped production, which also affected the normal production and operation of both upstream and processing companies,” Zhao said.
Some companies have also faced cancellations or reductions in overseas orders due to geopolitical uncertainties, Zhao said.
Weaker production and demand accelerated job cuts in factories, with the employment sub-index slipping to 48.6 in March, the lowest level since February 2021.
Worst since Wuhan
“Probably PMI underestimated the hit to activity last month,” said Julian Evans-Pritchard, senior China economist at Capital Economics.
“The service index remained above the low of 45.2 hit last August during the delta wave. This is probably due to the fact that the survey was conducted before the most serious failures.
To cushion the impact of the new Covid-19 lockdown measures, authorities have unveiled steps to support businesses, including rent waivers for some smaller service companies.
On Wednesday, the government said it would roll out policies to stabilize the economy as soon as possible amid increased pressure.
Analysts say the central bank, which kept its benchmark interest rate for corporate and household lending unchanged in March, will cut rates and lower reserve requirements for banks as downward economic pressure builds.
China’s official composite PMI, which combines manufacturing and services, was 48.8 in March from 51.2 in February.
The composite PMI was at its second-lowest on record since February 2020, when the index fell to 28.9 due to the initial Covid-19 outbreak.
“This suggests that the economy is contracting at its fastest pace since the height of the initial Covid-19 outbreak in February 2020,” Evans-Pritchard said.