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China’s outlook continues to deteriorate

In case you missed it, the Caixin Chinese Services PMI released early in the day dipped to 42.0 from 50.2. That’s a two-year low and comes with Shanghai’s covid outbreak now showing signs of abating.

An April 1 survey of 163 American companies by the American Chamber of Commerce showed that 99% of them had already been affected by the latest epidemic in Shanghai.

Cases there have hit record highs for five consecutive days, including 17,007 in the latest report. The city of 25 million remains on lockdown indefinitely and officials offer no clues to ease the ‘covid zero momentum’ policy despite growing dissatisfaction.

This could change as economic costs increase and there is no point in trying to control omicron, but until that happens expect to see continued deterioration in China. Additionally, restrictions in Shanghai and elsewhere in China will add another wrinkle to a desperately tight supply chain.

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