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China’s economic activity contracted in August, official data showed on Tuesday, as the rapid spread of the Delta variant brought large areas of the country into isolation.

The country’s official composite purchasing manager index stood at 48.9, well below the 50 point level that marks the threshold between growth and contraction.

The month of August was marked by a particularly weak performance of a service sector hampered by new containment measures.

“The outbreak of the pandemic in several provinces and several locations [this month] dealt a pretty big blow to the service industry, which was still recovering, ”said Zhao Qinghe, senior statistician at China’s National Bureau of Statistics.

The official index assesses the activity of companies in various sectors of the Chinese economy and places more emphasis on public employers than the private PMI Caixin, which is scheduled for release on Wednesday.

Shoppers wear masks on Nanjing East Road in Shanghai © Qilai Shen / Bloomberg

The non-manufacturing PMI fell to 47.5, despite a strong performance from the construction industry, while a services sub-index lost nearly six points to 45.2.

Growth in the manufacturing sector also slowed, from 50.4 in July to 50.1 in August. Car manufacturing performed particularly poorly in August, Zhao said.

Iris Pang, chief economist for China at ING, said that while the effects of Covid-19 lockdowns would be short-lived, other factors, such as a semiconductor shortage, government crackdown on the industry, education and a more volatile labor market would send manufacturing out, and non-manufacturing gauges fell in September.

“The contraction in non-manufacturing activity was unexpected,” Pang said. “Certain negative factors, including the government’s crackdown, will continue to put downward pressure on the non-manufacturing PMI over the coming months.”


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