Chinese manufacturing and services activity simultaneously shrank in March for the first time since 2020, official data showed Thursday, as the country's worst COVID-19 outbreak in two years brought factory closures and lockdowns for Shanghai and two other industrial centers.
The world's second-largest economy revved up in January-February, with some key indicators blowing past expectations but is now at risk of slowing sharply as authorities restrict production and mobility in COVID-hit cities, including Shanghai and Shenzhen.
The monthly purchasing managers' index (PMI) of the Chinese statistics agency and an industry group, the China Federation of Logistics and Purchasing, fell to 49.5 from February's 50.2 on a 100-point scale. Numbers below 50 show activity contracting.
Sub-indicators of new orders, new export orders, employment, production and business expectations all declined, the report said.
The last time both PMI indexes simultaneously were below the 50-point mark that separates contraction from growth was in February 2020, when authorities were racing to arrest the spread of the coronavirus, first detected in the central Chinese city of Wuhan.
"Even if the outbreak is brought under control soon, it will still take a while for the economy to get back on track," Julian Evans-Pritchard of Capital Economics said in a report.
Most businesses in Shanghai, China's most populous city, have been ordered to close while millions of people are tested for the virus.
Access to Changchun and Jilin in the northeast has been suspended, forcing automakers and other factories to shut down. Restrictions also have been imposed on some smaller cities.
"Recently, clustered outbreaks have occurred in many places in China," NBS senior statistician Zhao Qinghe said in a statement Thursday.
"Coupled with a significant increase in international geopolitical instability, the production and operation activities of Chinese enterprises have been affected," he added.
For weeks China has recorded thousands of virus cases each day, after nearly two years of virtually extinguishing infections within its borders. That has rattled its "zero-COVID" strategy.
Some companies temporarily reduced or stopped production because of COVID-19, which also hit logistics flows.
The non-manufacturing PMI also plunged to 48.4 from 51.6 with the service industry significantly hit by the virus outbreak.
Nomura chief China economist Lu Ting expected PMIs to drop further "on escalated lockdowns and social distancing measures."
"Beijing's determination in maintaining its zero-COVID-19 strategy for fighting the infectious omicron variant will very likely deal a severe blow to the Chinese economy," he told Agence France-Presse (AFP).