December 13, 2022
A private-sector business survey revealed that China’s services activity declined to six-month lows in November as expanding COVID control measures weighed on demand and operations, signaling a further blow to economic development.
The Caixin/S&P Global services purchasing managers’ index (PMI) shrank for a third consecutive month, from 48.4 to 46.7. On a monthly basis, the 50-point index threshold divides expansion from contraction.
The statistics confirmed insufficient findings from a broader official poll that services activity had declined to seven-month lows.
Infections with COVID-19 increased to all-time highs in November. By the end of the month, analysts at Nomura estimated that places under lockdown accounted for almost a quarter of China’s GDP, stifling domestic demand, upsetting supply lines, and even sparking infrequent street protests in numerous cities.
As hundreds of millions of people wait for an anticipated change in policies following major social unrest, the recent relaxing of anti-virus restrictions in some Chinese cities has been welcomed with a combination of relief and concern. The majority of specialists caution that the road to a final reopening will be difficult and rocky and that another spike in illnesses this winter would force authorities to tighten security once more.
Companies in the Caixin/S&P survey reported the sharpest drops in output and new business in six months, and they continued to lay off employees as confidence in the economy’s prospects for the coming year hit an eight-month low.
The rate of job losses was the fastest since the survey’s inception in November 2005, indicating more labor market pressures.
One encouraging development was that export business began to expand again after contracting in October, in part because of the loosening of regulations governing international travel.
Despite a slowdown in the inflation of input costs, businesses also kept raising their prices.
Caixin/S&P’s composite PMI, which measures activity in both the manufacturing and service sectors, dropped from 48.3 in October to 47.0 in November as a result of declines in both the manufacturing and service sectors’ output.
Source: Reuters
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