China’s Services Expansion Falters on Slowdown in New Orders, Caixin PMI Shows
China’s services sector expanded at the slowest pace in 14 months in June, dragged by slowdowns in business activity and new orders, a Caixin-sponsored survey showed Monday.
The Caixin China General Services Business Activity Index, which gives an independent snapshot of operating conditions in the sector, fell to 50.3 in June from 55.1 the previous month. A number above 50 indicates an expansion in activity, while a figure below that points to a contraction.
The index, better known as the Caixin China services PMI, showed the services sector expanded for a 14th consecutive month, but at the lowest rate since April 2020.
The indicator is closely watched by investors as one of the earliest available monthly barometers of the health of the world’s second-largest economy. The fall in the Caixin services PMI dovetails with the decline in the Caixin China manufacturing PMI for June, which slipped to 51.3 from 52 the previous month, according to data released Thursday.
Overall, the Caixin China General Composite PMI, which covers both the manufacturing and services sectors, fell to 50.6 in June from 53.8 the month before, according to the Monday survey report.
In the services sector, both business activity and total new orders rose at the slowest pace in 14 months, as the recent domestic outbreaks of Covid-19 cases and reduced travel dampened demand. New export business expanded slightly last month though, after shrinking in May due to the resurgence of the Covid-19 virus in other countries.
The softer growth in new orders led to easing pressure on capacity in June, resulting in a slight fall in staff numbers in the services sector. The employment measure dipped for the first time in four months as companies readjusted their staffing in light of the changes, with some employees leaving their jobs due to recent Covid-19 flare-ups in certain areas, according to the survey carried out between June 10 and June 22.
“Employment in the services sector came under pressure. The resurgence of Covid-19, coupled with weakening supply and demand, hurt the labor market,” said Wang Zhe, senior economist at Caixin Insight Group. “Also, due to the weak market, service enterprises’ outstanding workload decreased.”
Service companies’ input cost inflation eased markedly in June, with operating expenses experiencing the shallowest increase since September, the survey showed. To attract new business, companies lowered output prices for the first time since July 2020, though discounts were slight.
Although service providers remained optimistic about their prospects over the next 12 months, the overall degree of positive sentiment dipped to a nine-month low in June amid concerns over the resurgence of the Covid-19 virus at home and abroad. Nonetheless, many firms were confident that the pandemic will be controlled, and that market conditions and global demand will further recover over the coming year, the survey showed.
China’s official services PMI, released by the National Bureau of Statistics on Wednesday, fell to 52.3 (link in Chinese) in June from 54.3 the previous month.
Contact reporter Luo Meihan (firstname.lastname@example.org) and editor Michael Bellart (email@example.com)
Read more about Caixin’s economic indexes.
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