China’s new coronavirus outbreaks expose vulnerable economic recovery as January factory activity slows
- A slowdown in manufacturing activity last month shows China’s economic recovery from the coronavirus may be ‘peaking’, as the country battles new infections
- Outbreaks in northern provinces and curbs on travel over the Lunar New Year holiday have led some analysts to downgrade first quarter growth forecasts
After becoming the only major economy to record positive growth in 2020, China’s recovery from the coronavirus pandemic appears to have plateaued this year, with lockdown measures to control virus outbreaks in the north expected to drag on first quarter output, according to new business surveys and analysts.
However, the loss of economic steam could allay some market concern that Chinese policymakers were primed to roll back monetary stimulus measures too quickly.
The data broadly mirrored China’s official manufacturing PMI, released on Sunday, which fell more than expected to 51.3 last month from 51.9 in December, the worst January reading since 2012.
China’s economic recovery is peaking; the economic cycle has gradually turned to stagflation from recovery
The slowdown in manufacturing was accompanied by a fall in the official non-manufacturing index, which measures activity in the services and construction sectors. It tumbled to 52.4 last month from 55.7 in December – the biggest drop since China imposed nationwide lockdowns in February last year.