China’s Factory And Services Activity Both Plunges In March 2022 Driven By Domestic COVID-19 Resurgence And Disruption Due To Ukraine Conflict

China's manufacturing and services sectors both contracted for the first time in two years in March as the domestic COVID-19 resurgence disrupted economic activity, data released on Thursday (Mar 31) showed.

The official manufacturing purchasing managers’ index (PMI) fell to 49.5, from 50.2 in February, according to the country's National Bureau of Statistics (NBS). A reading below 50 indicating contraction.

Another index- Caixin/Markit Manufacturing Purchasing Managers' Index (PMI)- also fell to 48.1 in March, indicating the sharpest contraction since February 2020, from 50.4 in the previous month. Caixin survey (a privately run) tracks small firms in coastal regions compared with the official NBS survey.

The official March composite PMI, which tracks both factory and services activity, plunged from 51.2 in February to 48.8 – the second-lowest reading since the index dropped to 28.9 in February 2020 at the peak of Wuha coronavirus outbreak.

Resurgence in domestic Covid-19 cases especially in key business hubs, latest virus outbreaks in China, disruptions in international shipping and greater market uncertainties from the Ukraine crisis led customers to cancel or suspend orders.

Chinese government is still pursuing its zero-Covid” policy, which involves hadr lockdowns and mass testing. Shanghai authorities on Sunday ordered a snap lockdown covering different parts of the city across eight days.