China’s services activity contracted at a slower pace in December as surging Covid infections following the reversal of Covid Zero disrupted economic activity.
(Bloomberg) — China’s services activity contracted at a slower pace in December as surging Covid infections following the reversal of Covid Zero disrupted economic activity.
The Caixin China General Services Purchasing Managers Index was 48 last month, according to a statement from Caixin and S&P Global on Thursday.
That was not as steep as November’s fall to 46.7, but it was still below the 50 level that separates expansion from contraction. The figure was also better than the expectation of a 46.8 reading from economists in a Bloomberg survey.
The abrupt abandonment of strict Covid controls last month fueled rising infections in major cities, disrupting business activity and prompting people to stay home. New business decreased for a fourth month, although at a slower pace than in November, according to the Caixin and S&P Global statement. New export business declined for the second time in three months, according to a statement on the index.
Even so, “service providers expressed strong confidence in an economic recovery” following the end of Covid Zero, Wang Zhe, senior economist at Caixin Insight Group, said in a statement accompanying the data.
While the worst may be over for some places as activity starts to pick back up, the virus is still spreading fast in other cities and the countryside. A likely travel rush during the Lunar New Year holiday period in late January could see another spike in cases, inflicting further economic pain in the first quarter.
“In the short term, infections are expected to explode, which will disrupt production and everyday life,” he said. “How to effectively coordinate Covid controls with economic and social development has once again become a crucial question.”
The data is still in contractionary territory but were somewhat better than the official service business activities index, which fell to 39.4 in December from 45.1 in November. That was the lowest reading since February 2020, and the fourth consecutive month of contraction.
Broader gauges of the non-manufacturing and manufacturing sectors released by the National Bureau of Statistics also showed weakness in the economy in December. Those indexes fell last month to the worst level since February 2020, when the coronavirus was first impacting the nation.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.