© Reuters. China’s Factories Contract For First Time Since Pandemic Began
(Bloomberg) — China’s factory activity contracted in September for the first time since the pandemic began last year, a sign of the damage a widespread electricity crunch is having on an already slowing economy.
The official manufacturing purchasing managers’ index declined to 49.6 from 50.1 in August, the National Bureau of Statistics said Thursday, below the 50 median estimate in a Bloomberg survey of economists. Readings below the 50-mark signal a contraction in output.
The non-manufacturing gauge, which measures activity in construction and services sectors, improved to 53.2, well above the consensus forecast of 49.8.
China is facing a widespread power crunch that threatens to slow economic growth and disrupt global supply chains just ahead of the year-end Christmas shopping season. At least 20 provinces have restricted electricity use in September, curbing factory production on everything from aluminum and steel to toys and clothing.
The electricity shock adds to a slew of headwinds already hitting the economy: the financial system is under stress because of China Evergrande Group’s debt crisis; high commodity prices have squeezed industrial profits; the government has cracked down on industries from property to the internet; and consumer spending remains weak due to virus outbreaks.
What Bloomberg Economics Says…
China’s September PMIs offered the first glimpse of the cost from the energy crunch — and, for the manufacturing sector, it’s substantial. The manufacturing PMI dropped into contraction. The services sector staged a comeback, but is by no means recovering strongly.
Chang Shu, chief Asia economist
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The services sector, which contracted in August for the first time since early 2020, benefited somewhat from spending over the three-day Mid-Autumn Festival holiday, rebounding to 52.4. Even so, tourism revenue and travel remained below pre-Covid levels, indicating still weak consumer confidence after the government imposed stringent virus control measures to bring a wave of delta clusters under control.
Other key highlights from the PMI data:
- New orders fell to 49.3 from 49.6
- New export orders index dropped to 46.2 from 46.7
- Sub-index for manufacturing jobs declined to 49 from 49.6; non-manufacturing employment improved to 47.8 from 47
- Construction sub-index fell to 57.5 from 60.5
©2021 Bloomberg L.P.
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