China’s services sector has taken an unexpected hit in August due to a wave of coronavirus infections sparking new lockdowns across the country. This resulted in an official gauge of nonmanufacturing activity falling into contractionary territory for the first time since China’s recovery from the first wave of the pandemic more than a year ago. China’s official nonmanufacturing purchasing managers index tracks activity in the construction and services sectors. The index fell from 53.3 in July to 47.5 in August, according to recently released data by the National Bureau of Statistics. Therefore, the index broke through the 50 mark that is the difference between expansion and contraction.
The 47.5 reading shocked economists’ forecasts for a reading above 50 and marks the first time that this index has fallen into contraction since February 2020. The highly infectious Delta Covid-19 variant has visibly dampened demand for services requiring human-to-human contact, according to the statistics bureau. The most significant fall was recorded in the services subindex, with a drop of more than 10 points recorded in August compared to July’s 52.5. Other subindexes that fell into contractionary territory this month include catering, sports, entertainment, and air transport, ground transport, and accommodations.
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