China’s Factories Were Struggling Even Before Virus Worsened

(Bloomberg) -- The first official indicator of the Chinese economy in 2020 signaled the nation’s factories were struggling even before the country shut down for the Lunar New Year and the coronavirus outbreak worsened.

The manufacturing purchasing managers’ index dropped to 50, according to data released by the National Bureau of Statistics on Friday, matching the median estimate of economists

The non-manufacturing gauge was 54.1, compared with 53.5 the previous month

Due to the Lunar New Year holiday, the surveys were conducted between Jan. 15 and Jan. 20, according to the National Bureau of Statistics, rather than between the 20th and 25th of each month as normal

Key Insights

The economic impact of the new coronavirus could be more evident in the coming weeks, with many business shut for at least another week and people avoiding going out and spending for fear of getting sick

The economic hit to China could exceed that seen during the SARS outbreak of 2003, according to Nomura Holdings Inc. Gross domestic product growth could “materially drop” this quarter from the 6% pace at the end of 2019, maybe even more than the 2 percentage point deceleration seen in the second quarter of 2003, Nomura economists led by Lu Ting wrote in a recent report to clients

The worsening health crisis has seen numerous economists revise down their forecasts for growth. Many expect the government and central bank will step in to cushion the blow

--With assistance from Alexandra Veroude.

To contact Bloomberg News staff for this story: Yinan Zhao in Beijing at yzhao300@bloomberg.net

To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, James Mayger, Malcolm Scott

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