By Ambar Warrick 

-- Chinese manufacturing activity contracted for a second straight month in August, PMI data showed on Wednesday, as COVID-19 lockdowns and a brewing power crunch continued to weigh on economic activity.  

The official manufacturing purchasing manager’s index (PMI) read 49.4 for August, compared to a reading of 49.0 in July. But the reading was still better than analyst expectations of 49.2, indicating a slight improvement in conditions from the previous month.

A reading below 50 indicates contraction in the sector. August's reading indicates that a recovery seen earlier in the year has largely died down, pointing to more pain for the Chinese economy. 

A drought-driven power crunch, which dented activity in the Sichuan province and shut off lights in Shanghai was the latest source of disruptions for the country’s manufacturing sector in August.  

Renewed lockdowns in industrial hubs such as Yiwa also pressured activity, as factories were shut in compliance with COVID-19 rules.

Weakness in the manufacturing sector now appears to have spread into other facets of the economy, with August’s non-manufacturing PMI reading at 52.6, lower than July’s reading of 53.8.

This, coupled with a contraction in the manufacturing sector, saw China’s composite PMI for August fall to 51.7 from 52.5 in July. The reading also fell below estimates of 52.3. 

Beijing’s refusal to budge on its strict zero-COVID policy is at the heart of China’s economic woes this year, with crippling lockdowns in Shanghai and other major hubs grinding manufacturing activity to a halt. China’s economy barely managed to grow in the second quarter of 2022. 

The sharp slowdown in activity has seen Beijing introduce more stimulus measures to shore up growth. But a new series of COVID lockdowns in August may offset this.