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

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China’s Caixin/S&P Global services purchasing managers’ index (PMI) rose to 48 in December from 46.7 in November, data released on Thursday showed. Photo: Reuters

Published: 10:04am, 5 Jan 2023

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.

The Caixin/S&P Global services purchasing managers’ index (PMI) rose to 48 in December from 46.7 in November, but remained below the 50-point mark, which indicates contraction in activity, for a fourth straight month.

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.

The hit to business caused by the new spread of the virus extends the pain to the services sector from the country’s stringent curbs, which were lifted in early December, and reflects a similar trend seen in a larger official services PMI published last week.

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.