China’s factory activity contracts as Covid disruptions spread

• China’s factory activity decreased for the second consecutive month in November.
• Purchasing Managers’ Index fell to 48.0, down from 49.2 in October.
• Large portions of the country were affected by Covid-19 lockdowns and transit disruptions.

China’s factory activity decreased for the second consecutive month in November, according to government data released on Wednesday. Large portions of the country were affected by Covid-19 lockdowns and transit disruptions.

According to data from the National Bureau of Statistics, the Purchasing Managers’ Index (PMI), a key indicator of manufacturing in the world’s second-largest economy, fell in at 48.0, down from 49.2 in October and well below the 50-point threshold separating expansion from contraction (NBS).

China has insisted on its zero-Covid strategy of eradicating outbreaks through stringent quarantines and mass testing, despite this month’s record-breaking infection rates, which have weighed on demand and business confidence.

“In November, impacted by multiple factors including the wide and frequent spread of domestic outbreaks, and the international environment becoming more complex and severe, China’s purchasing managers’ index fell,” said NBS senior statistician Zhao Qinghe in a statement.

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The manufacturing PMI has been in contraction territory for all but four months so far this year, as a summer of heat waves was sandwiched between severe Covid lockdowns in key cities throughout the spring and fall.

In November, domestic outbreaks slowed manufacturing and reduced product orders, according to Zhao, who also noted “increasing market volatility.”

All business sizes experienced a decline in activity throughout the month, with the PMI for small businesses falling to 45.6.

The non-manufacturing PMI came in at 46.7 points in November, indicating a contraction in activity and a decline from October’s 48.7 points.

The pandemic had a rather major impact on certain places, according to Zhao, who noted that “the total industry business volume fell significantly” in the transportation, lodging, catering, and entertainment sectors.

Despite a better-than-anticipated third-quarter expansion of 3.9 percent, many analysts believe China will struggle to achieve its annual economic growth goal of approximately 5.5%.

In the meantime, rare nationwide protests have emerged among a people tired by three years of the zero-Covid policy, while officials have sent confusing signals regarding the strategy’s eventual demise.

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