Reuter’s: Beijing, China China’s factory activity fell more quickly in April because of widespread COVID-19 lockdowns, which slowed down industrial production and disrupted supply chains. This raised fears that China’s economy will slow down sharply in the second quarter, which will hurt global growth.
The Manufacturing Purchasing Managers’ Index (PMI) fell to 47.4 from 49.9 in April, the National Bureau of Statistics said on Saturday. This is the second month in a row that the PMI has been down. That was the lowest it had been since February 2020, when it was at its lowest point.
People who took part in a Reuters poll thought the PMI would fall to 48, well below the 50-point mark that separates contraction from growth on a monthly basis, which was 48.
The headline PMI number, combined with a sharper cut in services, gave the first look at how an economy ravaged by COVID restrictions, like the long shutdown of the commercial hub, Shanghai, was doing. This was the first sign of how the economy was doing.
According to a Caixin survey, people who own businesses in China believe factory activity has dropped at the fastest rate in 26 months. There has been a big drop in China’s new export orders index since June 2020, which means that one of the country’s few bright spots is going down.
There has been a big drop in both demand and supply in the manufacturing sector because of the COVID problems.
It says some companies are having a hard time getting supplies of key raw materials and components, selling finished products, and keeping their inventory in check. The NBS expects things to improve when the pandemic is under control and supportive policies are in place.
China has a very strict policy called COVID, which means that many major cities are either in full or partial lockdown because of it.
More and more analysts are cutting their growth forecasts for the world’s second-largest economy because so many people are at home.
From 49.5 in March to 44.4 in April, the production sub-index went down. New orders fell to 42.6 from 48.8 in March.
Is the risk of a recession going up?
There will be a short-term drop in production at Tesla’s factory in China because of the country’s restrictions on electric cars. Tesla said last week that the shutdowns at its Shanghai plant had cost it about a month’s worth of work.
Some analysts are even warning that the risk of a recession is getting higher. They say that policymakers need to do more to reach an official 2022 growth target of about 5.5 percent.
It’s not just COVID restrictions that are hurting growth, analysts say. They say soft consumption and a long-term downturn in the housing market are also having an effect.
Government officials have said that they will do more to help people feel better and keep jobs from being lost in a politically–charged year.
China will help more with policy, the Politburo, a top decision-making body of the Communist Party, has said, giving some hope to the world’s stock markets that have been down.
It will be more difficult for them unless China changes its zero-COVID policy, which it hasn’t done yet.
As long as these official messages are good for the economy and businesses, the most important thing is what the government is doing and how it is being done. This is what Zhiwei Zhang, president and chief economist of Pinpoint Asset Management, said in a client note on Friday.
Analysts say that traditional policy tools, like cutting interest rates and giving more money to businesses, may have little effect if lockdowns stop businesses from working.
Leaders from all over the world met this week, and they announced a big infrastructure push to help the economy grow. This shows that Beijing likes big projects to help the economy.
There’s a lot of work that goes into these projects, and Beijing is worried about another huge stimulus programme like the ones in 2008 and 2009 when it spent $605.82 billion.
Sudden changes in policy could also cause more money to leave the country, which could make things even more difficult for policymakers.
A lot happened to the yuan in April, which was the worst month for it in 28 years. Stock markets have been the second-worst this year, after Russia, which has been hit by sanctions. [CNY/]
Analysts had predicted that China’s GDP would grow by 4.4% in the first three months of the year, but March data showed that retail sales fell and the jobless rate rose to its highest level since May 2020.
In April, a sub-index of construction activity, which Beijing had hoped would help the economy grow this year, was at 52.7. This was down from 58.1 in March, when it was at 58.1.
In a statement on Thursday, Caterpillar Inc. (NYSE:CAT) said that demand for excavators in China could fall below pre-pandemic levels by 2022. Even General Electric (NYSE:GE) Co and 3M Co. have seen their sales drop because of the lockdowns.
Among small and medium-sized businesses, a banker at one of China’s top 10 banks said she had seen the most change.
A woman told me that the smaller borrowers and those who work in the manufacturing industry are having a hard time this time because they don’t have enough money.
