A private gauge measuring activity in China’s manufacturing sector tumbled to its lowest level in more than two years in March, reflecting the impact of strict government measures to stamp out the highly transmissible Covid-19 Omicron variant sweeping the country.
The Caixin China purchasing managers index slipped to 48.1 in March from February’s 50.4, hitting its lowest level since February 2020, according to data released Friday by Caixin Media Co. and Markit.
A reading above the 50 mark suggests activity expansion, while one below that level indicates activity contraction.
Both subindexes measuring factory output and total new orders came in at their lowest level since February 2020, when the world’s second-largest economy was hit the hardest by the pandemic, Caixin said.
Companies surveyed said government measures to contain Covid-19 had disrupted operations and supply while damping customer demand.
The subindex measuring new export orders fell to its lowest level in 22 months, as overseas demand fell sharply and global transportation conditions deteriorated, Caixin said.
Meanwhile, manufacturers were squeezed by rising inflation exacerbated by the Russia-Ukraine war. Subindexes of both input costs and output prices rose to five-month highs in March.
Wang Zhe, an economist at Caixin Insight Group, said China faces stagflation risks as the economy has been ravaged by a wave of Covid-19 outbreaks, rising uncertainty from the Russia-Ukraine war and elevated commodity prices.
The Caixin manufacturing PMI pointed in the same direction as a competing official gauge, which ended its streak of four straight months of expansion in March after China’s major manufacturing hubs were hit hard by the latest Covid-19 wave.
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