China PMI Contracts to the Weakest on Record


China's manufacturing and service PMIs plunged to their worst readings in history.

In the midst of a coronavirus pandemic, China Posts Weakest Factory Activity on Record

The manufacturing purchasing managers’ index plunged to 35.7 in February from 50 the previous month, according to data released by the National Bureau of Statistics on Saturday, much lower than the median estimate of economists. The non-manufacturing gauge also fell to its lowest ever, 29.6. Both were well below 50, which denotes contraction.

“The sharp drop in China’s manufacturing PMI in February reinforces our view that the normalization in economic activity will be delayed,” as can be seen in high-frequency data, said Xing Zhaopeng, an economist at Australia & New Zealand Banking Group. “There’s scant chance for a V-shaped rebound -- the authorities are using targeted aids more than stimulus to stabilize the economy and that will lead to a gradual bounce.”

Progress on that front has been made in recent weeks, with Bloomberg Economics estimating Chinese factories were operating at 60% to 70% of capacity this week. The statistics bureau said Saturday that as of Feb. 25, the work resumption rate at mid- and large-enterprises in the PMI survey was 78.9%, and will rise to 90.8% by the end of next month. At medium- and large-scale manufacturing companies, it was 85.6% and will rise to 94.7% by end-March, the NBS said.

When things crash, a rebound is all but certain. But when?

I highly doubt China will be producing at 90.8% capacity by the end of March.It's more believable China will report such a number.

Meanwhile the coronavirus is spreading exponentially elsewhere. So what does that say about demand prospects globally?

What's Happening Background

  1. Feb 19: Fed Minutes Highlight Coronavirus Concerns and Uncertainty 8 Times
  2. Feb 24: Bond Yields Crash and Gold Soars on Pandemic Threat
  3. Feb 25: CDC Admits Spread of Coronavirus in the US Appears Inevitable
  4. Feb 25: Lie of the Day: This is Not a Pandemic
  5. Feb 25: Nearly 50% Odds of "At Least" 3 Rate Cuts by December
  6. Feb 26: Trump says We are "Very, Very Ready for the Coronavirus, for Anything"
  7. Feb 27: Useless Act: California Monitors 8,400 People for Coronavirus; 33 Test Positive
  8. Feb 27: Containment Fails: Coronavirus Tweets of the Day
  9. Feb 27: Tweets of the Day: Iran's VP Infected, Japan Closes All Schools
  10. Feb 28: 5 Mistakes by the CDC and FDA Set Back Virus Testing

Mike "Mish" Shedlock

Comments (21)
No. 1-9

What happens when the globalized supply chain breaks? We don't know, exactly, but I think that we're going to find out in exacting detail. This is like a grand experiment. The consequences of these interruptions are going to reverberate across the globe. Even to your home town. I hope people are taking notes.

Tony Bennett
Tony Bennett

"China's manufacturing and service PMIs plunged to their worst readings in history."


Thanks to offshoring everything not nailed down expect to find empty shelves here in US at some point. Stuff on shelves now (from China) shipped Q4 (even Q3) 2019.

Russell J
Russell J

Considering the videos and info we've seen and what the CCP has admitted too ( 760,000,000 people on lock down ) I would be surprised that there was even that much economic activity. As bad as the chart looks its almost certainly much worse, you absolutely cannot trust anything from the CCP. They lie about everything. Why would they be honest with the world now? The CCP does not respect anyone that is not a member of the CCP, just look at the way they treat their own people the Han Chinese with their 5000+ years of written history and breeding. What do you think they think of us? Stupid, trusting mutt dogs would be my guess.

At some point there will be a beginning of a return to normalcy but its probably at least a year away. The world has to get some control over this situation which will require a vaccine and that will take time to develop, produce (in the billions) and distribute to the billions.

8 weeks ago no one had even heard about this virus in china, now its in 59 countries. There is no reason to believe this isn't just getting started.

At least 1 year before a beginning of a return to normal would be my guess.


In the world of public numbers, China issues numbers that serve their purposes--it's all under control, it may be bad, but it's not that bad, recovery will happen soon...

Speaking of "recovery", has anyone figured out the question of what you do with a quarantined population when a portion of the "recovered" people show up weeks later symptomatic again? Do say, oh, its just a few that do and you open the cage up and let all the birds fly, or do you keep the cage locked longer keeping all birds in, or do you identify the persistent carriers (how?) and institute a "super-quarantine", or what?


I'd love to be a fly on the wall as the CCP Standing Committee debates how to roll this out:
"....Let's just show a down tick to, say, 6.0% growth from the 6.1% we had planned. A large increase may be hard to sell this quarter, given that Hong Kong's still rioting and the streets from Kunming to Shanghai have been empty for months now."

"Hell no, let's do like the Americans and use this as an excuse to dump the garbage we've allowed to accumulate since we last tried to hold a recession. Remember Tiananmen Square? We don't do recession well. For GDP, Let's go negative, another western innovation, and post -6.0%."

Xi: "Split the difference. We own the bank; Write it all off and post 0.0% growth. Adjourned."


"This time is different" may, for once, be true. Modern economies have never faced a global pandemic. Even the Spanish flu of a century ago hit a far less vulnerable society. Most people retained a lot of pre industrial know how. They could survive a month on their own. They had a 'community' for support and did not live in an anonymous, atomized society. The coming days are going to be might interesting.


Has there been confirmation that this virus was a natural virus or manmade in the bioweapons lab at Wuhan. I suspect if it was an accidental bioweapon release no one will ever know about it as that would be suppressed by both the communists and western govts. The nature of this virus ie being contagious after becoming asymptomatic is not the characteristic of a typical natural virus, seems to me at least. Have not heard a peep about the source for a while now.


This disruption of the global supply chain has been an irrefutable argument against Adam Smith's "Wealth of Nations". Each link in the global supply chain has become so concentrated / monopolistic that when one link becomes week, the entire world suffers. Clearly it is better that nations have slightly less than perfect industries and services to protect against external forces beyond their control.


Politicians love war because it reduces the supply of workers and raises demand at the end of the conflict. A "Global Pandemic" pretty much has the same effect and I'm confident this is what Trump was stating when he called the Coronavirus a hoax.

Global Economics