China’s services sector growth hit three-month low in January even before coronavirus crisis, Caixin PMI shows

The Caixin/Markit services purchasing managers’ index (PMI) slowed to 51.8 from 52.5 in December, but was still higher than an eight-month low hit in October

The reading is, though, unlikely to reflect the early impact of the coronavirus crisis that flared in late January, which could weigh heavily on growth

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The Caixin/Markit services purchasing managers’ index (PMI) slowed to 51.8 last month from 52.5 in December, but was still higher than an eight-month low hit in October. Photo: Bloomberg

Published: 10:51am, 5 Feb 2020Updated: 6:03pm, 14 Feb 2020

Growth in China’s services sector slowed for a second straight month in January, a traditionally busy sales season, hitting a three-month low as companies cut prices and new orders dipped, a private sector survey showed on Wednesday.

The Caixin/Markit services purchasing managers’ index (PMI) slowed to 51.8 last month from 52.5 in December, but was still higher than an eight-month low hit in October.

The slowdown in growth suggests the services sector, which accounts for more than half of the economy, faces persistent challenges despite a flurry of stimulus and a US-China phase one trade deal. The reading is also unlikely to reflect the early impact of the coronavirus crisis that flared in late January, which could weigh heavily on growth.

“China’s economic recovery was not strong enough due to limited improvement in demand, and some companies didn’t replenish inventories,” Zhengsheng Zhong , director of macroeconomic analysis at CEBM Group, wrote in a note accompanying the Caixin PMI release.

China’s economic recovery was not strong enough due to limited improvement in demand, and some companies didn’t replenish inventories

Zhengsheng Zhong

The index has stayed above the 50-point margin that separates growth from contraction on a monthly basis since late 2005. Beijing has been counting on a strong services sector to cushion a prolonged slowdown in manufacturing and investment and create jobs for workers laid-off in other areas.