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Mainland China economy contracted in March: IHS Markit
10 Apr '20
2 min read
Pic: Shutterstock
Business activity in China fell for a second successive month in March, but the rate of contraction eased markedly as fewer firms reported an initial hit from the COVID-19 outbreak and some companies returned to work after shutdowns, according to the Caixin China Composite Output Index compiled by London-based global information provider IHS Markit.
However, while manufacturing showed some signs of stabilising after February's steep decline, the service sector continued to contract at a rate only exceeded once in the survey's history by Februarys' record downturn. Consumer services providers in particular continued to report reduced demand as a result of social distancing measures, IHS Markit said in a press release.
The index, covering the Chinese mainland, rose from an all-time low of 27.5 in February to 46.7 in March. Despite the record rise in points terms, the index remained below the neutral level of 50.0 to signal a second successive monthly decline in output across the combined manufacturing and service sectors, with the rate of contraction running at the second-quickest recorded since early-2009.
Some comfort can be drawn from the March survey showing a further marked rise in backlogs of work, as constraints such as supply chain delays and shortages of workers due to the COVID-19 outbreak continued to limit activity in the short-run, hinting that output could rise when these constraints ease.
However, the concern is that global demand will weaken as increasingly draconian methods to limit the pandemic hit spending in coming months, causing a renewed dip in activity.
Worse affected in March was the service sector, where business activity continued to contract at a rate not previously seen in the services purchasing managers’ index (PMI) survey's 15-year history with the exception of February's all-time record slump.
Levels of incoming new business in the service sector continued to fall, linked in part by a further slump in exports of services, in turn causing job shedding to accelerate to the quickest on record. Business expectations in the sector meanwhile rose only modestly from February's record low.
Factory employment also fell for a third successive month, though likewise saw the rate of decline ease considerably from the record drop signalled in February, according to the press release.
However, while manufacturing showed some signs of stabilising after February's steep decline, the service sector continued to contract at a rate only exceeded once in the survey's history by Februarys' record downturn. Consumer services providers in particular continued to report reduced demand as a result of social distancing measures, IHS Markit said in a press release.
The index, covering the Chinese mainland, rose from an all-time low of 27.5 in February to 46.7 in March. Despite the record rise in points terms, the index remained below the neutral level of 50.0 to signal a second successive monthly decline in output across the combined manufacturing and service sectors, with the rate of contraction running at the second-quickest recorded since early-2009.
Some comfort can be drawn from the March survey showing a further marked rise in backlogs of work, as constraints such as supply chain delays and shortages of workers due to the COVID-19 outbreak continued to limit activity in the short-run, hinting that output could rise when these constraints ease.
However, the concern is that global demand will weaken as increasingly draconian methods to limit the pandemic hit spending in coming months, causing a renewed dip in activity.
Worse affected in March was the service sector, where business activity continued to contract at a rate not previously seen in the services purchasing managers’ index (PMI) survey's 15-year history with the exception of February's all-time record slump.
Levels of incoming new business in the service sector continued to fall, linked in part by a further slump in exports of services, in turn causing job shedding to accelerate to the quickest on record. Business expectations in the sector meanwhile rose only modestly from February's record low.
Factory employment also fell for a third successive month, though likewise saw the rate of decline ease considerably from the record drop signalled in February, according to the press release.
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British Textile Machinery Association (BTMA)
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