China’s services sector activity growth eases amid coronavirus woes
- Caixin/Markit services purchasing managers’ index (PMI) fell to 55 in August from 55.5 in July
- Last week, the official non-manufacturing PMI fell to 52.6 from 53.8 in July
A strong rebound in China’s services sector eased slightly in August amid fresh coronavirus flare-ups, but business confidence rose to a nine-month high in a rare bit of good news for the struggling economy, a private survey showed on Monday.
“The Caixin China general services business activity index [the headline services PMI] fell modestly to 55 from 55.5 in July, but remained resilient in August. Surveyed companies mentioned that easing Covid restrictions and improvements in demand supported the recovery of service sectors,” said economists from Goldman Sachs.
“That said, both the NBS and Caixin services PMI pointed to a softened recovery of services sector in August.”
Total new orders rose for the third month in a row, but foreign demand remained subdued with the new export business subindex shrinking for the eighth straight month amid continued curbs on travel.
Despite the rise in new business, companies again shed staff. The services sector is one of the most vulnerable industries under Beijing’s zero-Covid policy and has also been hit by a sharp slump in the property market.
Service providers continued to grapple with rising costs, with the subindex of input prices rising at the quickest clip in four months. Companies cited rising prices for labour, raw materials, food and marketing, but were only able to pass on a fractional increase in the fees they charged.
Analysts expect even tighter antivirus measures heading into the key Communist Party congress in October. Several megacities have tightened containment measures this week.
With the increase in adverse factors such as recurring Covid-19 cases and natural disasters leading to a sluggish job market and shrinking consumer demand, the government should step up measures such as additional subsidies and assistance for low-income groups
“With the increase in adverse factors such as recurring Covid-19 cases and natural disasters leading to a sluggish job market and shrinking consumer demand, the government should step up measures such as additional subsidies and assistance for low-income groups,” said Wang Zhe, senior economist at Caixin Insight Group.
Nevertheless, business confidence remained firmly in positive territory in August as companies expected conditions to gradually normalise.
Caixin’s August composite PMI, which includes both manufacturing and services activity, dropped to 53 from 54 in July, with services growth offsetting an unexpected contraction in factory activity.
The Caixin PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in China.
Additional reporting by Andrew Mullen
