Virus controls impact China’s holidays, economic recovery

Bloomberg

China’s efforts to control a recent resurgence of Covid-19 are undercutting a recovery that’s been one of the bright spots in the global economy.
Travel has collapsed ahead of the Lunar New Year holidays after recent lockdowns were imposed in northern China to
curb outbreaks and the government took steps to discourage millions of people from making the annual trip to their hometowns. The first official economic data for January also showed a slowdown in activity, with services hit hard.
The manufacturing purchasing managers’ index fell for a second month to 51.3 while
the non-manufacturing gauge dropped to 52.4 from 55.7 in
December, the National Bureau of Statistics said.
A separate manufacturing survey released on Monday also signalled weaker growth, with the index dropping to 51.5 in January, worse than economists expected.
Activity usually slows ahead of the Lunar New Year holiday, which begins next week, but curbs on travel this year to try and stop the spread of the
coronavirus are a further complication. Spending on travel, restaurants and gifts will likely decline, but industrial output may increase as some companies look to work through the holidays to keep up with surging export demand.
“The economy extended its expansion in January but lost speed more abruptly than expected,” Chang Shu, chief Asia economist at Bloomberg Economics, wrote in a report. “The slowdown was sharper in services than manufacturing, reflecting a heavier impact of the winter surge in virus cases and increase in containment measures on consumption than production.”
The government restrictions this year will radically change the new year migration, which normally sees people making 1.7 billion trips as millions travel from the cities back home to spend time with family. A Ministry of Transport official said earlier in January that there would be 40% fewer trips this year than in 2019, but high-frequency data so far indicates the contraction may be much greater than that.
There were 17.3 million trips made, a decline of more than 75% compared to the same day before the new year in 2019 or 2020, according to official data.
Dining, accommodation, entertainment and transportation services “fell meaningfully” in the January PMI data, Goldman Sachs economists led by Helen Hu wrote in a report.