China Manufacturing Activity Weakens On Covid Containment Measures

(RTTNews) - China's factory activity deteriorated further at the end of the year as Covid-19 containment measures together with softer demand forced manufacturers to downsize production.

The Caixin manufacturing Purchasing Managers' Index edged down to 49.0 in December from 49.4 in the previous month, survey results published by S&P Global showed on Tuesday.

The reading has remained below the neutral 50.0 mark for the fifth successive month suggesting contraction as Covid-19 outbreaks dampened manufacturing activity.

The official PMI survey results published over the weekend also showed that manufacturing and services sectors weakened the most since early 2020 despite the abrupt abandonment of zero Covid policy in December.

New business continued to fall due to relatively weak demand conditions amid the ongoing pandemic, S&P Global said. Foreign demand also declined at a quicker pace on sluggish global economic situation and the pandemic.

Production dropped at the softest pace in four months. In line with fall in new orders, companies reduced their purchasing activity at a faster rate. Inventories of purchased items as well as finished goods decreased further.

There was another reduction in employment due to lower production requirements and difficulties in sourcing workers.

Average input prices increased only slightly in December and firms continued to lower their selling prices as part of efforts to boost competitiveness.

Manufacturers were more optimistic about their production outlook as the pandemic situation improves and market conditions strengthen.

"Overall, the pandemic continued to take a toll on the economy in December," Wang Zhe, a senior economist at Caixin Insight Group said. Infections are expected to explode in the short-run, which will severely interfere with production and everyday life.

"How to effectively coordinate Covid controls with economic and social development has once again become a crucial question," Zhe said.