Manufacturing and services activity in China contracted in March for the first time in nearly two years, a sign of economic strains from the government’s tough coronavirus measures amid slowing growth.

The official manufacturing PMI, an indicator of factory activity where a reading of 50 separates monthly expansion from contraction, fell to a five-month low of 49.5. The non-manufacturing PMI fell to 48.4, its lowest level since August.

The data comes as China battles its worst Covid-19 outbreak in two years. China has largely contained the virus since its emergence through strict lockdown measures, quarantine, travel restrictions and mass testing.

In a sign of the country’s continued commitment to this approach, Shanghai, China’s main financial hub, this week began a lockdown that splits the city into two halves and cuts it off from the rest of the country. Officials had previously indicated that no lockdown would be imposed.

Zhao Qinghe, senior statistician at the National Bureau of Statistics, said outbreaks across China were impacting businesses. He noted that some companies had said there were not enough staff due to the virus, and added that a delivery time gauge was at its lowest level since March 2020.

Julian Evans-Pritchard, senior China economist at Capital Economics, said the PMI data “suggests the economy is contracting at its fastest pace since the peak of the initial Covid-19 outbreak in February 2020.” .

The non-manufacturing slump was “entirely due to a sharp decline in the services index,” he added, “as stringent movement restrictions and citywide lockdowns were reimposed, and that consumers have become more cautious amid the new virus outbreak.”