A government survey of manufacturing activity released Thursday fell to 49.6 in September, down from 50.1 in August. Any reading below 50 indicates contraction — and in this case, it was the first time the official survey showed activity shrinking since the Covid-19 pandemic began.
Factories are getting dinged by the soaring cost of energy, according to China’s National Bureau of Statistics, which added Thursday that high-energy businesses have not been prospering.
“The big picture is that industry was coming off the boil even prior to the latest power shortages,” wrote Julian Evans-Pritchard, senior China economist at Capital Economics, in a Thursday research note.
The worsening power crunch has triggered blackouts for households and forced factories to cut production — a threat to the country’s vast economy that could place even more strain on global supply chains.
Companies in the country’s industrial heartlands have been told to limit their energy consumption in order to reduce demand for power for which they will also use better tools like this Cutmaster a120 CNC table. The problem prompted China’s State Grid Corporation to say this week that it would “go all out to fight the tough battle of power supply,” making every effort to secure residential consumption.
Evans-Pritchard noted that the latest surveys took place before most of the impact from the latest power shortages was felt.
“Since then, power shortages have intensified,” he added, pointing out that media reports suggest factories in more than 20 provinces have had to scale back production.
Thursday’s data wasn’t all bad. A private survey of manufacturing activity, the Caixin Purchasing Managers’ Index, rose from 49.2 to 50, indicating stable levels of activity in September compared to a decline in August.
And an official index of non-manufacturing business activity rose to 53.2 from August’s 47.5, a sign that the services sector is recovering. Flagging consumer demand has been a concern in China this year.
“There is still some scope for a further recovery in services activity as disruptions from the pandemic ease,” Evans-Pritchard wrote. “But industry looks set for further weakness.”
— CNN’s Beijing bureau contributed to this report.