RPT-COLUMN-China’s manufacturing activity rises as COVID wave ebbs: Kemp
(Repeats column published on Jan. 31 without changes to text.)
By John Kemp
LONDON, Jan 31 (Reuters) - China’s manufacturing activity has started to increase as the coronavirus epidemic wanes, after the country abandoned its suppression strategy that severely disrupted the economy with a series of city lockdowns.
The manufacturing purchasing managers’ index rose to 50.1 (between the 26th and 34th percentiles for all months since 2011) in January from 47.0 (1st percentile) in December.
Business activity expanded at the fastest rate since September and at essentially the same pace as a year ago, according to the data published by the National Bureau of Statistics (NBS).
The NBS manufacturing index appears low, barely above the theoretical 50-point threshold dividing expanding activity from a contraction, but that may understate the increase in activity.
But China’s manufacturing index has been generally lower and less variable than the comparable indices published for the United States and the euro zone by the Institute for Supply Management and S&P Global respectively.
Chartbook: China purchasing managers' index
The index has averaged just 50.5 since 2011 compared with averages of 52.1 for the euro zone and 54.3 for the United States.
China's index has a standard deviation of 1.59 points compared with 3.99 points for the United States and 4.88 for the euro zone.
The NBS index was in the 26-34th percentiles in January, higher than the United States (6th percentile) and the Eurozone (21st percentile) in December.
China’s state-controlled media has reported that the wave of coronavirus infections peaked in late December and subsequently waned in January.
Given controls on reporting and the scarcity of official data, there is no way of verifying the claim independently but it is consistent with what is known about the way respiratory epidemics behave.
Before COVID-19 erupted in early 2020, British planning for an influenza pandemic assumed it would pass through the population in roughly 15 weeks with half of all deaths occurring in the middle 3-week period.
Coronavirus, especially the most recent variants, is known to be significantly more transmissible than influenza so it is likely the peak would occur faster. (“U.K. pandemic preparedness strategy”, Department of Health, 2011).
Similarly, much of what we know about historical epidemics such as plague suggests they move through populations very quickly (“The Black Death 1346-1353”, Benedictow, 2004).
In medieval Europe, plague could move through an individual village or city in just 2-3 months from the first infection to the last (“The Black Death: Intimate Story of a Village in Crisis”, Hatcher, 2008).
China eased most controls on Dec. 7, partly in response to street protests, but the epidemic had been accelerating for some weeks and was already well established in most major cities.
Peaking infections in late December or early January is therefore plausible and would be consistent with this stylized timeline.
Infection rates are likely to have declined significantly in the second half of January and continue to decline in February and March.
If that timeline holds, manufacturing and freight transportation activity is likely to increase over the next two months.
China’s economy is moving through a very accelerated J-curve, with severe disruption in November and December followed by a rebound in January and likely even faster growth in the rest of the first quarter of 2023.
- Recession now or later? Unenviable alternatives for 2023 (Reuters, January 26, 2023)
- China's re-opening and the J-curve in oil consumption (Reuters, December 13, 2022)
John Kemp is a Reuters market analyst. The views expressed are his own (Editing by Emelia Sithole-Matarise)