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BEIJING: China’s services sector activity slumped in April to the second lowest on record, independent data showed Thursday, in a further sign of an economic slowdown caused by the country’s Covid-linked restrictions.

The figures come as China’s leaders battle the highly infectious Omicron variant that has led to the locking down of major cities including Shanghai, the biggest in the country.

The purchasing managers’ index (PMI) released by Chinese media group Caixin came in at 36.2 in April, significantly lower than analysts expected and the worst since February 2020 at the beginning of the pandemic.

It is also the second straight month of decline, and below the 50-point mark separating growth from contraction.

PMIs are a key gauge of business activity and the Caixin survey, which covers small and medium-sized enterprises, is seen by some as a more accurate reflection of China’s economic situation than official figures, which more closely track large state groups.

“The new round of Covid-19 outbreaks hit the service sector hard,” said Wang Zhe, senior economist at Caixin Insight Group in a statement.

Asian markets drop as US rout, China worries hit sentiment

The Caixin report said companies frequently linked the fall in activity to tighter Covid restrictions and subsequent disruptions to operations, with measures such as lockdowns dampening consumer demand.

Supply and demand “contracted severely” and the gauge for new export business fell to its lowest since April 2020.

“Some companies, affected by the drop in orders, laid off workers to lower costs,” Wang added, noting that high energy and raw material costs also weighed on firms.

China’s government-released PMIs also plummeted last month to their lowest levels since early 2020, while a subdued Labour Day holiday this week points to continued pressure on businesses.

Fitch Ratings this week cut its forecast for China’s full-year economic growth to 4.3 percent, from a previous projection of 4.8 percent and lower than the government’s official target.

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