By John Kemp
LONDON (Reuters) - China's manufacturing sector contracted this month as coronavirus outbreaks, city-level lockdowns, rising input prices and the severe disruption of global supply chains take their toll on output and new orders.
The official purchasing managers' index for the manufacturing sector slipped to 49.5 in March from 50.2 in February, the National Bureau of Statistics said on Thursday.
The manufacturing index fell into just the 9th percentile for all months since 2011 down from the 36th percentile last month and the 91st percentile a year ago.
The output sub-index, which has been decelerating for over a year, fell to 49.5 this month and is now in only the 2nd percentile for all months since 2011.
Manufacturers are being hit by more challenges soon after recovering from the coal crisis that forced electricity rationing last autumn.
China is the world's largest or second-largest consumer and importer of most energy products and industrial raw materials, so the slowdown will inevitably spill over into global markets.
The only question now is whether the downturn will be short and shallow or turn into something more prolonged and deeper, which would increase recessionary pressure worldwide.
The answer depends on (a) the sustainability of the country's dynamic-clearing approach to coronavirus containment; (b) the deterioration of the global economy in response to surging energy prices and the conflict in Ukraine; and (c) the effectiveness of the government's measures to rekindle demand.
The slowdown associated with the coal and electricity crisis lasted less than four months, but that was largely a supply crisis caused by a temporary shortage of fuel; this crisis is occurring on both the supply and demand sides of the economy simultaneously and is far more complex.
Related columns:
- China's cooling economy takes some heat out of commodity prices (Reuters, March 30)
- Economic war pushes business cycle to tipping point (Reuters, March 23)
- Western economies on brink of recession as Russia sanctions escalate (Reuters, March 8)
- Global recession risks rise after Russia invades Ukraine (Reuters, March 4)
- John Kemp is a Reuters market analyst. The views expressed are his own