China’s factory activity suffered the sharpest contraction on record in February, the Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) showed, underlining the crippling effects of tough travel curbs and public health measures taken to contain the outbreak. That followed the Chinese government’s similarly dire PMI release on the weekend, which also showed a record pace of decline.
The slump in the world’s second-largest economy dealt a severe blow to factories across Asia, including those in Japan, South Korea and Taiwan, offering the clearest evidence yet of the epidemic’s damaging effects on global growth and businesses. Fears the virus would wreak havoc on the global economy sent financial markets into a tailspin last week and raised expectations of co-ordinated monetary policy action by central banks to mitigate the fallout. Trillions of dollars were wiped off equity markets, with world shares posting their biggest weekly decline since the depths of the 2008 financial crisis.
“The slump in manufacturing activity looks to have had a significant impact on trade,” Capital Economics wrote in a research note on the Caixin PMI. “The PMIs also point to a major hit to employment, the effects of which will take longer to reverse. And with the jump in virus cases overseas, there is a growing risk of a protracted downturn in foreign demand.”
Investors now await PMI readings out of major euro zone economies due later in the day, which are also expected to point to declining activity.