China’s services sector activity extended decline in December as Covid-19 surge hit supply, demand
- Caixin/S&P Global services purchasing managers’ index (PMI) rose to 48 in December from 46.7 in November
- Last week, the official non-manufacturing PMI, which measures business sentiment in the services and construction sectors, fell to 41.6 in December from 46.7 in November
China’s services activity shrank in December as surging coronavirus infections hit demand, a private-sector survey showed on Thursday, although the pace of recent declines slowed while business confidence rose to a 17-month high.
China abruptly removed its stringent zero-Covid strategy in early December after rare public protests over the protracted curbs, triggering a surge infections across the country.
Companies in the Caixin/S&P survey reported the falls in output and new work for the fourth straight month in December, and external demand fell into contraction from growth the previous month.
However, surveyed firms were nonetheless bullish about recovery prospects for the next 12 months thanks to the lifting of restrictions that could lead to increased consumption, with the confidence index rising to a 17-month high.
In December, companies also continued to cut staff and raise their prices, while input cost inflation softened.
“Both supply and demand shrank in the sector due to Covid outbreaks, with the gauges for business activity and total new business staying below 50 for the fourth straight month in December,” said Wang Zhe, senior economist at Caixin Insight Group.
“Nonetheless, some service companies reported that business had improved since November. The pandemic also took a toll on overseas demand as the reading for new export orders slid back into contraction.”
This requires not only elevated social expectations and confidence in development, but various policies to work in tandem in stabilising the job market and effectively increasing the disposable income of residents
Chinese leaders have pledged to focus on stabilising the economy in 2023 and step up policy adjustments to cushion the impact from a surge in infections at a time when a weakening global economy is hurting exports.
“This requires not only elevated social expectations and confidence in development, but various policies to work in tandem in stabilising the job market and effectively increasing the disposable income of residents,” added Wang.
Caixin/S&P’s composite PMI, which includes both manufacturing and services activity, rose to 48.3 in December from 47 in the previous month, remaining in contractionary territory for the fourth straight month.
The Caixin PMI is compiled by S&P Global based on responses to questions sent to purchasing managers in China.
