China’s Caixin Manufacturing PMI falls to its lowest level in over 2 years

A private gauge metering activity in China’s manufacturing sector plunged to its lowest level in more than two years in March, reflecting the impact of strict government measures to eradicate the highly transmissible Covid-19 omicron variant sweeping the country.

Caixin China’s purchasing managers’ index slipped to 48.1 in March from 50.4 in February, the lowest level since February 2020, according to data released on Friday by Caixin Media Co. and Markit.

A reading above the 50 mark indicates an expansion in activity, while a reading below indicates a contraction in activity.

Both sub-indices, which measure factory production and total new orders, hit their lowest levels since February 2020, when the world’s second-largest economy was hardest hit by the pandemic, Caixin said.

The companies surveyed indicated that government measures to contain Covid-19 had disrupted operations and supplies while dampening customer demand.

The sub-index, which measures new export orders, fell to its lowest level in 22 months as foreign demand fell sharply and global transportation conditions worsened, Caixin said.

Meanwhile, manufacturers have been squeezed by rising inflation, exacerbated by the Russia-Ukraine war. The sub-indices of both input costs and output prices rose to a five-month high in March.

Wang Zhe, an economist at Caixin Insight Group, said China faces risks of stagflation as the economy has been hit by a wave of Covid-19 outbreaks, rising uncertainty from the Russia-Ukraine war and elevated commodity prices.

The Caixin Manufacturing Purchasing Managers’ Index pointed in the same direction as a rival official gauge, which ended its four-month streak of expansion in March after China’s key manufacturing hubs were hit hard by the latest Covid-19 wave. China’s Caixin Manufacturing PMI falls to its lowest level in over 2 years

Brian Lowry

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