John Kemp

LONDON (Reuters – China’s manufacturing industry contracted in February as rising input costs, coronavirus strains and lockdowns at city levels, along with severe disruptions to global supply chains, have taken their toll on new orders and output.

On Thursday, the National Bureau of Statistics reported that the official buying managers index in the manufacturing sector fell to 49.5 from 50.2 in February.

Since 2011, the manufacturing index has fallen to just 9th percentile in all but one month, compared with the 36th percentile and the 91st%ile a year earlier.

Although the output subindex has been declining for nearly a full year, it fell to 49.5 last month. This puts it in just 2nd place for every month since 2011.

Soon after a recovery from last year’s crisis caused by coal, the manufacturers will face new challenges.

China is either the largest importer or consumer of energy products in the world, and the slowdown will undoubtedly impact global markets.

It is unclear whether this recession will be quick and shallow, or if it will turn into something deeper and longer. This would only increase the global recessionary pressure.

Answers will depend on: (a) whether the country can sustain its dynamic-clearing approach towards coronavirus confinement; (b), the decline in the global economy as a result of rising energy prices and conflict in Ukraine; and, (c) how effective the government’s efforts to revive demand.

While the slowdown that came with the electric and coal crises lasted for less than 4 months, this was in large part a short term supply shortage. The current crisis involves both demand and supply simultaneously. It is more complex.

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John Kemp works as a Reuters analyst. His views are his alone