China manufacturing slows amid Covid-19 disruptions

China’s factory activity contracted for the first time since April 2020 as fresh virus outbreaks disrupted production, a private gauge showed Wednesday. 

The Caixin Manufacturing Purchasing Managers’ Index dropped to 49.2 in August from July’s 50.3, missing the median estimate of 50.1. The 50-level separates expansion in activity from contraction. 

The data adds to signs of slowing growth momentum in the world’s second-largest economy after China imposed strict measures to bring new virus cases under control in August. The Caixin survey comes a day after the official manufacturing PMI showed a weakening in output in August, remaining just above the 50 mark. 

The Caixin index surveys smaller and private companies, while the official PMI covers larger, state-owned enterprises.

The drop in the Caixin index was largely due to lower production, a deterioration in supplier performance, higher raw material prices and an increase in transportation costs, according to Caixin and IHS Markit. 

“Both supply and demand in the manufacturing sector shrank as the Covid-19 outbreaks disrupted production,” said Wang Zhe, senior economist at Caixin Insight Group, which released the data. “Authorities need to take a holistic view and balance containing Covid-19, stabilising the job market, and maintaining stability in supply and prices.”

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