China's Economy Struggles on Covid Curbs, Property Woes

  • In Business
  • 2022-09-30 02:28:15Z
  • By Bloomberg

(Bloomberg) -- China's factory activity continued to struggle in September, while services slowed, as the country's economic recovery was challenged by lockdowns in major cities and an ongoing property market downturn.

Most Read from Bloomberg

  • MacKenzie Scott Files for Divorce From Science Teacher Husband

  • Meta to Cut Headcount for First Time, Slash Budgets Across Teams

  • Stocks Plummet to 22-Month Low as Fed Hawks Circle: Markets Wrap

  • Trump Refuses to Delay Florida Deposition in Phone-Fraud Case Despite Hurricane

  • Top Apple Executive Is Leaving After Making Crude Remarks in TikTok Video

The official manufacturing purchasing managers index rose to 50.1 from 49.4 in August, according to a statement from the National Bureau of Statistics on Friday. That compared with the median estimate of 49.7 in a Bloomberg survey of economists. Any figure higher than 50 indicates expansion.

The non-manufacturing gauge, which measures activity in the construction and services sectors, fell to 50.6 from 52.6 in August. That was lower than the consensus estimate of 52.4.

Separately, the Caixin private gauge of manufacturing activity fell to 48.1 in September from 49.5 in August. That was worse than the consensus expectation of 49.5.

China's fragile economic recovery has been challenged this year by the country's adherence to Covid Zero, a policy intended to stamp out infections that has caused intermittent turmoil to supply chains, taken a toll on spending and damaged business confidence. Data earlier this week showed profits of industrial firms shrank in the first eight months of the year.

"The mild recovery of factory activities is more than offset by the weakness in service activities," said Raymond Yeung, chief economist at Australia & New Zealand Banking Group. He added the bank does not think gross domestic product can attain 3% growth in the third quarter.

While the official manufacturing activity edged out a gain in September, new orders are still in contraction, an indication of soft demand, NBS analyst Zhao Qinghe said in a statement. The new orders sub-gauge was 49.8, a slight improvement from August's 49.2.

What Bloomberg Economics Says ...

"China's September purchasing managers' surveys on balance gave a little reassurance on the recovery. Manufacturing started to stabilize, with production lifting the sector into expansion for the first time since June -- a reflection of more stimulus and reduced power shortages. That said, demand gauges were weak and the non-manufacturing sector slowed -- underlining a drag from the property rout and Covid Zero policy."

-- By Chang Shu and David Qu, economists

Read the full report here.

A sub-gauge measuring suppliers' delivery times, meanwhile, declined to 48.7 from 49.5, the lowest since May.

The services index was "affected by Covid outbreaks and other factors," Zhao said, adding that the driver of the fall in sentiment in that gauge was related to a fall in in-person activities such as retail sales, aviation and dining.

A fall in new orders was also a key factor in driving the private PMI gauge lower, according to Caixin and S&P Global.

"In general, the pandemic situation is still severe and complex, and the negative impact of Covid controls on the economy is still pronounced," said Wang Zhe, senior economist at Caixin Insight Group, in a statement accompanying that data. "Market optimism also dwindled significantly due to concerns about the economic outlook."

Demand from overseas for Chinese goods is also moderating: A gauge of new export orders in the official PMI fell to 47, the lowest in four months. The poor performance in the Caixin PMI also reflected the decline in demand, given the index focuses on private and export-oriented businesses.

Chinese stocks fell in early trading, against a broader decline in Asian equities. The benchmark CSI 300 Index slumped 0.4% as of 10:15 a.m. local time. The yield on China's 10-year government bond gained 1 basis point to 2.74%, while the onshore yuan weakened 0.1% to 7.131 per dollar.

The country's mobility restrictions are estimated to have shaved about 1.1 percentage points from China's GDP growth in the third quarter as consumption weakened, according to Natixis SA. The consensus estimate for growth this year is just 3.4%.

This month, Chengdu was locked down for about two weeks, reviving memories of painful curbs in Shanghai this spring and once again threatening economic output. The city of 21 million people, though, managed to contain the outbreak faster than Shanghai did.

On top of Covid restrictions, the country is also contending with a severe property market downturn. Home prices slumped for the 12th straight month in August, and a plethora of measures -- such as loosening purchasing restrictions and down payments, and lowering mortgage rates for some residences -- haven't been enough to solve the crisis.

The drag from the sector risks driving deflationary pressure, according to a private survey this week that showed companies reported the weakest growth in sales prices since the end of 2020.

(Updates with statements from NBS, Caixin and S&P, and analysts, along with more detail.)

Most Read from Bloomberg Businessweek

  • The Unstoppable Dollar Is Wreaking Havoc Everywhere But America

  • Jay Powell Needs Investors to Lose Money

  • Twitter Is in This Mess Because Jack Dorsey Was Too Busy Being a Bitcoin Influencer

  • Google's Low-Tech Plan to Solve the Opioid Crisis

  • As Home Prices Surge, Americans Are Moving to Cheaper Places

©2022 Bloomberg L.P.


More Related News

At Shanghai vigil, bold shout for change preceded crackdown
At Shanghai vigil, bold shout for change preceded crackdown
  • World
  • 2022-12-03 05:36:05Z

The mourners in Shanghai lit candles and placed flowers. One woman defiantly shouted for Chinese leader Xi Jinping to resign, emboldening others. The Nov. ...

Thailand Says Most Institutional Investors Must Pay Stock Tax
Thailand Says Most Institutional Investors Must Pay Stock Tax

(Bloomberg) -- Most institutional investors in Thailand won't be exempted from a tax levied on stock transactions that will resume next year after more than ...

Police: Quincy man hit Asian victim with car after yelling
Police: Quincy man hit Asian victim with car after yelling 'Go Back to China'
  • US
  • 2022-12-03 03:14:58Z

A 77-year-old man is being held without bail after police say he repeatedly told an Asian man to "Go back to China" before hitting him with his car.

Argentina's $44 Billion IMF Deal Gets Latest Staff Approval Seal

(Bloomberg) -- Argentina reached an agreement with staff from the International Monetary Fund on the third review of its $44 billion program even as the...

AT&T to Pay $6 Million to SEC Over Private Calls to Analysts
AT&T to Pay $6 Million to SEC Over Private Calls to Analysts

(Bloomberg) -- AT&T Inc. agreed to pay a $6.25 million penalty to settle an unusual lawsuit by federal regulators claiming its executives selectively...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply


  • Bahria Town Lahore
    (2022-09-30 09:17:46Z)

    Bahria Town Lahore is a dependable and promising private society situated at Waterway Bank Street. A few famous lodging social orders and milestones are found close by the lodging project. It is effectively available from a few significant streets of Lahore.


Top News: Business