China’s factory and services activities contracted further in November to seven-month lows as record numbers of COVID cases surged under the country’s controversial zero-COVID policy, hurting the economy’s weak outlook.

Reuters cited China’s National Bureau of Statistics, reporting that the official manufacturing purchasing managers’ index (PMI) fell to 48.0 in November, compared with 49.2 in October, and below Reuters’s economists’ expectation of 49.0.

November’s PMI reading is the lowest since April. A reading of PMI below 50 reflects contraction, while above indicates expansion.

Separately, the non-manufacturing index, measuring service sector activity, dropped to 46.7 from 48.7 in October and below the Bloomberg estimate of 48.0.

Zhao Qinghe, a senior statistician at the NBS, said, “In November, Covid outbreaks brought negative impact to some firms’ production and operation. Production activity slowed, and product orders declined.” 

Sheana Yue, a China economist at Capital Economics, said, “Downside risks continue to grow as the virus situation continues to worsen and will weigh heavily on the economy into 2023.” 

China’s economy faces many obstacles, such as weakening demands and an ongoing property crisis fueled by its strict COVID-controlled measures.

As COVID outbreaks spread to all its provinces, major cities like Beijing and Guangzhou have recently imposed new curbs to limit movements.

Beijing’s harsh measures even sparked protests in multiple cities over the weekend triggered by a deadly fire in Xinjiang that killed at least ten people.

The sub-indexes for manufacturing PMI measuring output, employment, and raw material inventories shrank in November faster than last month. The sub-index measuring suppliers’ delivery times and sub-in for new and export orders also fell further.

Last week, Nomura cut China’s GDP forecast for this year to 2.8% from 2.9%, while Bloomberg Economics lowered its growth projection to 3% from 3.5%.In September, Goldman Sachs lowered its forecast for China’s 2023 GDP to 4.5% from 5.3% while keeping its 3% growth forecast for 2022.

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