Covid-19 Delta Variant Pummels China’s Services Sector

BEIJING—China’s services sector suffered an unexpectedly severe blow in August as a wave of coronavirus infections sparked new lockdowns across the country, sending an official gauge of nonmanufacturing activity into contractionary territory for the first time since the country’s pandemic recovery began more than a year ago.

China’s official nonmanufacturing purchasing managers index, which tracks activity in the construction and services sectors, plummeted to 47.5 in August, from 53.3 the prior month, according to data released Tuesday by the National Bureau of Statistics, breaking through the 50 mark that separates expansion from contraction.

The 47.5 reading—which fell well short of economists’ forecasts for a reading comfortably above 50—marks the first time the official measure has dropped into contractionary territory since February 2020, at the height of the initial explosion of the coronavirus, which led to the lockdown of the central Chinese province of Hubei.

Largely responsible for the drop in the nonmanufacturing measure was a significant fall in the services subindex, which slid to 45.2 in August from July’s 52.5, as the highly infectious Delta coronavirus variant dampened demand for services requiring close human-to-human contact, the statistics bureau said.

Beginning with one outbreak in the eastern city of Nanjing in late July, the Delta variant quickly spread to more than half of China’s provinces, hurting a national services sector that was still far from full recovery, the statistics bureau said.

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