According to a private-sector business survey, COVID containment measures weighed on demand and operations in China, resulting in the country’s services activity dropping to six-month lows in November.
The data further points to a further slowing of economic growth.
The Caixin/S&P Global services purchasing managers’ index (PMI) fell to 46.7 from 48.4, marking the third consecutive monthly decline. On a monthly basis, the 50-point index mark distinguishes between growth and contraction.
The figure echoed weak data from a larger official survey released on Wednesday, which revealed that service activity had fallen to seven-month lows.
The new COVID- In November, the number of infections reached a new high of 19. According to Nomura analysts, areas under lockdown accounted for roughly a quarter of China’s GDP by the end of the month, choking domestic consumption, disrupting supply chains, and even sparking rare street protests in many cities.
“Since October, the impact of COVID outbreaks has taken a heavy toll on the economy, and the challenge of how to balance COVID controls and economic growth has once again become a core issue,” said Wang Zhe, senior economist at Caixin Insight Group.
“The market is in urgent need of policies to promote employment and stabilize domestic demand. Beijing should further coordinate fiscal and monetary policies to expand domestic demand and boost incomes of the poorer parts of the population,” Wang added.
The recent relaxation of anti-virus restrictions in some Chinese cities has been met with a mix of relief and concern, as hundreds of millions await an expected shift in policies following widespread social unrest. Most analysts believe the road to eventual reopening will be long and bumpy, and they warn that a further surge in infections this winter could result in further tightening of measures.
Companies in the Caixin/S&P survey reported the steepest drops in output and new work in six months, and they continued to lay off workers as confidence in the next 12 months fell to an eight-month low.
The rate of job losses was the fastest since the survey’s inception in November 2005, indicating further strains on the labor market.
One bright spot was that exports resumed growth after contracting in October, thanks in part to the relaxation of international travel rules.
Companies’ prices have also continued to rise, despite a slowing in input cost inflation.
After widespread protests, Beijing has softened its stance on the stringent COVID-19 measures, easing virus policies on testing requirements and quarantine rules in a significant shift in several Chinese cities.
As hopes for China’s reopening grow, economists and analysts say Beijing could abandon its zero-COVID policy as soon as next spring’s annual parliamentary meeting.
Caixin/S&P’s composite PMI, which includes both manufacturing and service sector activity, fell to 47.0 in November from 48.3 the previous month, owing to decreases in both manufacturing and service sector output.
S&P Global compiles the Caixin PMI from responses to questions sent to purchasing managers in China.
(Adapted from Latestly.com)