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China’s economy ended the year in a major slump as business and consumer spending plunged in December, with more disruption likely in the first few months of the year as Covid infections surge across the country.
Official data over the weekend showed the decline in manufacturing worsened last month, while activity in the services sector plunged the most since February 2020.
Separately, a private survey of businesses by China Beige Book International on Monday suggests the economy contracted in the fourth quarter from a year earlier.
China’s abrupt ditching of strict Covid controls in December fueled a surge in infections in major cities, prompting people to stay home as they fell ill or feared becoming infected.
While the outbreak has likely peaked in places like Beijing, and economic activity is starting to rebound there, the virus is spreading fast across the country. A likely travel rush during the Lunar New Year holiday in late January could see cases spread to rural areas, disrupting activity in the first quarter.
A private PMI survey due on Tuesday will likely also confirm the worsening decline in December. The Caixin manufacturing index probably dropped to 49.1 from 49.4 in November, according to economists surveyed by Bloomberg.
Citigroup Inc.
