As a result of the coronavirus outbreak, factory activity in China contracted at the steepest pace ever recorded during February. China’s Caixin General Manufacturing PMI declined to 40.3 in February from 51.1 in January, falling well below the 50-threshold indicating contraction.
The official PMI reading also came in far worse than expected, with economists having anticipated a reading of 45.7 instead. The strict lockdown measures enforced across several regions of the country have resulted in closure of factories even as travel restrictions keep workers from resuming work in many parts of China.
So far, around 80,000 people across China have been infected while the death toll nears 3,000. Both supply and demand have dampened, dealing a double blow to its manufacturing sector which was just showing some signs of recovery following the signing of the US-China phase one trade deal in January.
Manufacturing output fell sharply to 28.6 in February from 52 in January while new business slid to 34.9 during February from 51.9 in the previous month. On the positive side, the Chinese government has stepped in with some support measures which have helped business confidence soar to the highest level seen in five years, notwithstanding the poor performance seen in this sector in February.