Factory activity in China contracted at the fastest pace ever in February, even worse than during the global financial crisis, highlighting the colossal damage from the coronavirus outbreak on the world’s second-largest economy.
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China ’s official Purchasing Managers’ Index (PMI) fell to a record low of 35.7 in February from 50.0 in January, the National Bureau of Statistics said on Saturday, well below the 50-point mark that separates monthly growth from contraction.
The sombre readings provide the first official snapshot of the Chinese economy’s state since the outbreak of the COVID-19 epidemic which has killed almost 3,000 people in mainland China and infected about 80,000.
Economic paralysis
The data foreshadows that the economic disruption from the virus will likely extend to the whole first quarter of 2020 since the disease outbreak has caused widespread transport curbs and required tough public health measures that have paralysed economic activity.
“We expect year-on-year growth in all activity data to be negative in January-February as China’s economy has been severely constrained since January 23,” said analysts at Nomura in a note after the data release, citing the extended Lunar New Year holiday and the slow resumption of businesses.
Nomura now expects first-quarter growth to be 2% year-on-year while Capital Economics estimates China’s economy would contract outright in year-on-year terms this quarter, the first time since at least the 1990s.
A sub-index of manufacturing production nosedived to 27.8 in February from January’s 51.3 while a reading of new orders plunged to 29.3, down from 51.4 a month earlier. Analysts are warning the spread of the coronavirus to other countries will impact global supply chains and limit the recovery for Chinese manufacturers.
