According to a Reuters poll, China’s factory activity likely decreased in March as the country imposed more mass testing and activity controls in response to the worst resurgence of COVID-19 cases since early 2020.
According to the median forecast of 36 economists polled by Reuters on Wednesday, the official manufacturing Purchasing Managers’ Index (PMI) is expected to have fallen to 49.9 in March, the lowest reading in five months, from 50.2 in February.
A reading less than 50 indicates contraction from the previous month, while anything greater than 50 indicates expansion.
“In light of the worsening COVID-19 situation, particularly in Shanghai, we lower our forecast for the official manufacturing PMI to 49.0 from 49.5 previously.”
The contracting real estate sector and slowing export growth are also negative for March manufacturing PMIs, according to Nomura analysts in a note issued on Friday. There are two manufacturing PMIs, one official and one unofficial.
Following unexpectedly upbeat National Bureau of Statistics economic activity data for January and February, analysts warned that March data could worsen broadly.
“Almost all activity data point to a worsening slowdown in recent weeks, owing primarily to the escalated anti-Omicron measures and the deteriorating property sector,” Nomura analysts said.
In March, the latest COVID-19 resurgence resulted in lockdowns in the financial center of Shanghai and shutdowns in the tech hub of Shenzhen. Changchun, the capital of the virus-ravaged northeastern province of Jilin, has already completed more than ten rounds of citywide testing of its residents.
The rapidly worsening pandemic and escalating control measures weighed on the world’s second-largest economy. Premier Li Keqiang stated in March that the GDP growth target for 2022 is “around 5.5 percent.”
Goldman Sachs analysts said in a note on Monday that China’s stringent zero-COVID policy, anti-corruption scrutiny, and increased regulation of hidden local-government debt have changed the mindsets of local officials. Strong economic growth does not appear to be the priority it once was.
With the economy suffering from virus outbreaks and facing headwinds such as the uncertain future market effects of the Ukraine conflict, the government has promised a slew of policies aimed at assisting small businesses.
The finance ministry announced on March 24 that some small businesses would be exempt from paying the 3% value-added tax because they are the country’s main source of employment.
On Thursday, the official PMI, which focuses on large and state-owned firms, and its sibling survey for the services sector will be released.
On Friday, the private Caixin manufacturing PMI will be released. Analysts predict that its headline reading will fall to 50 from 50.4 the previous month.
Source: Reuters
