China factory activity sees shock contraction on Covid-19 outbreaks

China’s factory activity unexpectedly contracted in July, reversing earlier economic momentum as sporadic Covid outbreaks weigh on the recovery. 

The official manufacturing purchasing managers index fell to 49 from 50.2 in June, the National Bureau of Statistics said Sunday. Economists had expected a reading of 50.3, according to the median estimate in a Bloomberg survey of economists. 

A reading above 50 indicates expansion from the previous month, while anything below indicates contraction.

The non-manufacturing gauge, which measures activity in the construction and services sectors, decreased to 53.8 from 54.7 the previous month. That was below the consensus forecast of 53.9. 

China’s economic recovery has