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Hong Kong (CNN Business) -
China's economy stalled this month as the country tried to stamp out a surge in COVID-19 cases and grapple with the current shipping crisis.
An official survey of manufacturing activity shows that it fell to 50.1 in August, down from 50.4 in July.
This figure was just above the 50-point mark indicating expansion rather than contraction, but it is still the slowest rate of growth since the start of the pandemic.
A private survey of factory activity released Wednesday also showed signs of trouble.
The Caixin Purchasing Managers Index (PMI) for the manufacturing sector fell to 49.2 in August, indicating the first contraction since April 2020.
The service sector, which now represents a larger portion of the world's second-largest economy, performed even worse, according to the official survey.
The non-manufacturing PMI index plunged to 47.5 from 53.3 in July, the first contraction since February 2020.
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Initially, China's economy weathered the pandemic much better than many other countries, growing last year while others contracted.
But the aftermath of the delta variant and China's "covid-19 zero" approach have wreaked havoc in recent weeks.
The country's worst coronavirus outbreak in a year prompted authorities to take drastic measures to stop new infections, including the lockdown of cities, the cancellation of flights and the suspension of trade.
The aggressive and inflexible strategy appears to have contained the delta variant, at the cost of economic activity.
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"The latest polls suggest that China's economy contracted last month as the virus disruptions weighed heavily on services activity," wrote Julian Evans-Pritchard, senior China economist at Capital Economics, in a note from Tuesday investigation.
He added that the drop in the non-manufacturing PMI was entirely due to disruptions in the services sector, as "movement restrictions were re-imposed and consumers became more cautious amid the new virus outbreak."
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Ongoing problems in the global supply chain have made the situation worse.
Global trade has been in chaos for months as manufacturing rebound and exploding consumer demand, and supply chains have been further affected by container shortages, COVID-related factory closures -19 in Vietnam and the lingering effects of port closures in China.
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A terminal at the port of Ningbo-Zhoushan, south of Shanghai, was closed for weeks after a dock worker tested positive for COVID-19, adding to the delay caused by an earlier shutdown in southern China. , home to some of the busiest container ports in the world.
"There are still signs of tight supplies in the survey breakdown, with lead times lengthening even further as companies continue to reduce their raw material inventories," wrote Evans-Pritchard.
However, the covid-19 outbreaks and transportation problems are not the only things China is facing.
Beijing also started a massive crackdown on companies.
Technology, private education and other industries have been embroiled in the dispute.
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The drastic measures, especially in the technology and education sectors, "are affecting both concerns about employment in the affected sectors and consumer confidence in general, as fears of broader interventions increase" Jeffrey Halley, principal market analyst for Asia-Pacific at Oanda, wrote on Monday.
Evans-Pritchard expected most of the weakness reported on Tuesday to reverse in September, once COVID cases are under control in China.
But he said other concerns persist, noting that tight credit conditions pose a "growing drag."
"The bottom line is that even if the volatility caused by the recent virus outbreak in China is ignored, the economy appears to be coming back down to earth," he added.
Covid-19 Chinese economy