BEIJING: A strong rebound in China’s services sector eased slightly in August amid fresh COVID-19 surges, but business confidence hit a nine-month high in rare good news for the struggling economy , a private investigation revealed on Monday (September 5).
The Caixin Services Purchasing Managers’ Index (PMI) fell to 55.0 from a 15-month high of 55.5 in July, but remained well in expansion territory. The 50 point mark separates growth from contraction on a monthly basis.
The reading was in line with China’s official survey, released last week, which showed that the expansion of the services sector has slowed, possibly due to prolonged disruptions from COVID-19 and the impact of worst heat waves in decades.
Total new orders rose for the third month in a row, but foreign demand remained subdued, with the new export business sub-index falling for the eighth month in a row amid continued travel restrictions.
Despite the rise in new business, companies again laid off staff. The service sector is one of the most vulnerable industries under Beijing’s zero-COVID policy and has also been hit by a sharp decline in the real estate market.
Service providers continued to struggle with rising costs, with the input price sub-index rising at its fastest pace in four months. Companies cited rising prices for labour, raw materials, food and marketing, but could only pass on a fractional increase in the fees they were charging.
The world’s second-largest economy narrowly escaped a contraction in the second quarter due to widespread COVID lockdowns, and nascent signs of an early summer recovery quickly faded amid fresh virus outbreaks and restrictions of mobility. National rail travel hit an eight-year low in August.
Analysts expect even tougher anti-virus measures ahead of the key Communist Party congress in October. Several megacities have reinforced containment measures this week.
“With increasing adverse factors such as recurrent COVID-19 cases and natural disasters resulting in a sluggish labor market and declining consumer demand, the government should step up measures such as additional subsidies and assistance to low-income groups,” Wang Zhe said. , senior economist at Caixin Insight Group.
Nevertheless, business confidence remained firmly in positive territory in August, with companies expecting a gradual normalization of conditions.
Caixin’s August composite PMI, which includes both manufacturing and services activity, fell to 53.0 from 54.0 in July, as growth in services offset 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.