China manufacturing shrinks unexpectedly, for the first time since the Covid pandemic – Times of India

BEIJING: China’s factory activity unexpectedly shrank in September due to widespread restrictions on electricity access and soared input prices, while expanding services as the Covid-19 outbreak eased, leaving the world’s second-largest economy got some relief.
The official manufacturing purchasing manager’s index (PMI) stood at 49.6 in September versus 50.1 in August, National Bureau of Statistics (NBS) data showed on Thursday, slipping into contraction for the first time since February 2020.
China’s economy recovered rapidly from a pandemic-induced recession last year, but momentum has weakened in recent months, hit by rising costs, production bottlenecks and power rationing in its vast manufacturing sector.
Rising Covid-19 cases in tens of cities over the summer also disrupted the manufacturing and service sectors, though have since started to bounce back as the outbreak subsides.
A sub-index for factory output contracted in September for the first time since February last year, pulled down by a pullback in high energy-consuming industries, such as plants that process metals and oil products. The gauge was at 49.6 versus 50.1 a month ago.
“In September, the manufacturing PMI fell below the critical point, due to factors such as lower business volumes in high energy consuming industries,” Zhao Qinghe, a senior statistician at NBS, said in a statement.
“The two indices of industries with high energy consumption … both are below 45.0, indicating a significant decline in supply and demand.”
development approach
A sudden contraction in factory activity will weigh on an economy already curtailing its asset and tech sectors and facing several growth declines by private sector economists.
Other economies in Asia are also grappling with production issues due to supply chain disruptions, with data from Thursday showing Japan’s industrial output falling for the second straight month in August.
“(Chinese) economic growth in the fourth quarter will slow further without changes in government policies, and the pace of the slowdown may accelerate,” said Zhiwei Zhang, Shenzhen-based chief economist at Pinpoint Asset Management, after the PMI data was released.
“The big question is whether the government’s monetary and fiscal policies will become more supportive now or will the government wait until the end of the year to change policies.”
Just before the surge in domestic Covid-19 cases, the central bank in mid-July relaxed its requirements on how much cash banks should keep.
The People’s Bank of China (PBOC) has left its benchmark lending rate for corporate and household loans unchanged for the 17th month in September.
high production cost
Coal shortages, tighter emissions standards and strong demand from manufacturers and industry pushed coal prices to record highs and led to widespread restrictions on electricity access in at least 20 provinces and territories.
Higher raw material prices, especially of metals and semiconductors, have also put pressure on manufacturers’ profits. In August, earnings of Chinese industrial firms slowed for the sixth straight month.
A sub-index for raw material costs rose to 63.5 in September from 61.3 a month earlier, while the gauge of new orders came in at 49.3 compared to 49.6 in August, shrinking for the second month in a row.
A sub-index for employment remained in contraction at 47.8 versus 47.0 a month ago.
A separate private survey also released on Thursday that focused on small and export-oriented businesses showed that factory activity neither expanded nor contracted in September.
On a more optimistic note, the official non-manufacturing PMI in September stood at 53.2, bouncing back from 47.5 in August, NBS data showed, as the Covid-19 outbreak eased after peaking during the summer months. Was.
Last month, restrictions related to COVID-19 triggered a sharp contraction in service sector activity for the first time since the height of the pandemic last year.
The official September overall PMI, which includes both manufacturing and services activity, was 51.7 versus 48.9 in August.