Photographer: Qilai Shen / Bloomberg
Photographer: Qilai Shen / Bloomberg
China’s recent efforts to control the Covid-19 recovery are reversing a recovery that has been one of the bright spots in the global economy.
The first official data for January showed that economic activity expanded at a much slower pace compared to December, with the services sector significantly weaker. Manufacturing purchasing managers ’index fell to 51.3, while the non-manufacturing benchmark fell to 52.4 from 55.7 in December, according to data released Sunday by the National Bureau of Statistics.
Activity usually slows ahead of the Lunar New Year holidays which begin next week, but travel loops have traveled this year to try to stop the spread of the virus means many people will not be able to return to their homes. That limits spending on travel, restaurants and gifts, but that could lead to an increase in business output as some companies look to work through the holidays to keep up with the holidays. application.
Reduction in services
Locks and travel barriers cause a slowdown in activity
Source: National Bureau of Statistics
“The economy expanded in January but lost faster than expected,” Chang Shu, Asia’s chief economist at Bloomberg Economics, wrote in report. “The slowdown in services was sharper than in manufacturing, reflecting the heavier effects of the winter increase in virus cases and increased measures to restrict production consumption.”
Government restrictions this year will dramatically change the New Year’s migration, which typically sees people make 1.7 billion trips while millions travel from the cities back home to spend time. spend with family. An official from the Ministry of Transport said earlier in January that there would be 40% fewer trips this year than in 2019, but high-frequency data so far suggests the shortfall could be much greater than that. .
18.1 million visits were made last Friday, according to official data. That’s a decline of more than 70% compared to the same period before the new year in 2019 or 2020, according to calculations by Bloomberg.
Reduced travel
Significant reduction in the number of people traveling before the Lunar New Year
Source: Ministry of Transport, data compiled by Bloomberg
Eating, accommodation, entertainment and transport services fell “significantly” in January PMI data, economists Goldman Sachs Group Inc. wrote. led by Helen Hu in a report following the release of the data. The employment subprime also fell due to travel restrictions and people going home earlier than usual, possibly due to quarantine requirements, they wrote.
Business sustainability
Despite the weak unexpected results, the data showed the continued stability of the economy, particularly the industry sector. China’s recovery from the pandemic picked up near the end of 2020, with export momentum for medical and electronics products, and the manufacturing sector continued to expand in January, albeit at a slower pace.
While the sub-index for new export orders for factories fell to 50.2 and the index showed lower new orders at 52.3, both were above the 50 level that separates expansion and abbreviation.
Weak numbers could be good news for financial markets, which in January rolled into a money crisis and worries that the central bank and the government will tighten credit further.
“Bad news on PMIs could be good for commenting on policies,” Lu Ting, chief economist at Nomura Holdings Inc., wrote after the data was leaked. “Markets have been concerned in the past week about a potentially sharp move in Beijing’s policy stance, but today’s bad news on PMI could lead Beijing to believe it is not now the time for such a sharp shift in its policies and they could accept those market concerns. ”
Lu estimated last week that the Covid-19 ban measures in place will cut 1 percentage point from full domestic product growth in this quarter as a result of the pull in services.
– Supported by James Mayger, and Lin Zhu