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China’s economic activity contracted in August, official data released Tuesday showed, as the rapid spread of the Delta variant threw large parts of the country back into lockdown.

The country’s official composite purchasing managers’ index was 48.9, well below the 50-point mark that marks the threshold between growth and contraction.

August was marked by particularly poor performance from a service sector, hampered by new containment measures.

“The outbreak of the pandemic in several provinces and in several locations [this month] has dealt a rather severe blow to the service industry, which is still in the process of recovery, ”said Zhao Qinghe, chief statistician at the National Bureau of Statistics of China.

The official index measures business activity in various sectors of the Chinese economy and is more focused on government employers than the privately held Caixin PMIs due to be released on Wednesday.

Shoppers wear masks in Shanghai’s Nanjing East Road © Qilai Shen / Bloomberg

The purchasing managers index for the non-manufacturing sector fell to 47.5 despite strong development in the construction industry, while a sub-index for services fell by almost six points to 45.2.

Manufacturing growth also slowed from 50.4 in July to 50.1 in August. Automobile manufacturing did particularly poorly in August, Zhao said.

Iris Pang, chief economist for China at ING, said that while the effects of the Covid-19 lockdowns were short-lived, other factors such as a semiconductor shortage, government crackdown on education and a shakier job market would and will sink production Non-manufacturing gauges lower in September.

“The decline in non-manufacturing activities was unexpected,” said Pang. “Certain negative factors, including government crackdowns, will continue to depress the non-manufacturing PMI in the coming months.”

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