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Financial News: China's Manufacturing Contracts As Factories Shutdown Due

China's Manufacturing Contracts As Factories Shutdown Due To Coronavirus

03/01/2020 - 23:38:00 (RTTNews)

(RTTNews) - China's manufacturing sector contracted at a record pace in February as efforts to contain the recent outbreak of the coronavirus weighed heavily on performance of factories, survey data from IHS Markit showed Monday.

The Caixin manufacturing Purchasing Managers' Index fell sharply to 40.3 in February from 51.1 in January. This was the lowest reading since the survey began in April 2004.

A score below 50 indicates contraction in the sector. The reading was also well below economists' forecast of 46.0.

The survey showed that production, new work and staffing levels all fell at the quickest rates since the survey began nearly 16 years ago as companies extended their usual Lunar New Year shutdowns to help stem the spread of the virus.

Sales declined for the first time since June 2019 with companies widely linking the fall to the coronavirus and subsequent factory closures.

Lower production requirements drove the steepest decline in buying activity since the survey began around 16 years ago.

Employment across the manufacturing sector fell at the fastest rate in the series history as travel restrictions also impacted the supply of labor.

Meanwhile, cost pressures were subdued, with average input prices rising only moderately in February. However, factory gate prices fell for the first time in three months due to efforts to boost sales.

Encouragingly, manufacturers were confident that output would rise over the next year, with the degree of optimism reaching a five-year high.

The economy will be able to see a significant rebound when the epidemic is gradually contained and companies accelerate the resumption of business amid more proactive fiscal and monetary policies, Zhengsheng Zhong, chairman and chief economist at CEBM Group said.

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