Service sector

China’s service sector contracts sharply as virus containment measures tighten

China’s services sector notably contracted in March as the recent surge in COVID-19 cases and restrictions aimed at limiting the spread of the virus led to a sharp drop in activity, results of a survey showed on Wednesday. S&P Global survey.

The Caixin services purchasing managers’ index fell to 42.0 in March from 50.2 in February. This is the largest drop since the start of the pandemic in February 2020.

Total new work has declined at the fastest rate since March 2020. Pandemic-related restrictions, including those on mobility, have often been attributed to lower customer numbers and weaker demand conditions.

Membership fell in March, but the pace of the reduction was only fractional. At the same time, the disruption of business transactions led to a further increase in the level of outstandings.

The rise in input costs was stronger for service companies. The inflation rate was solid overall and faster than the series average.

Although fees charged by service companies increased slightly, the rate of increase was the lowest seen during the current seven-month inflation period.

When assessing the 12-month business outlook, Chinese service companies were generally optimistic about increased production over the next year. However, the level of optimism fell to its lowest level in 19 months.

Overall Chinese private sector activity has shrunk the most since the pandemic began in February 2020.

The composite production index fell to 43.9 in March from 50.1 the previous month. The reading reflects a further decline in manufacturing and services activity, with the latter noting the faster rate of decline.

“Right now, China is facing the most severe wave of epidemics since the start of 2020, said Wang Zhe, senior economist at Caixin Insight Group. Uncertainty has also increased overseas.

The outcome of the war between Russia and Ukraine is uncertain and the commodity market has convulsed, Wang added. Several factors added to the downward pressure on the Chinese market economy and highlight the risk of stagflation.

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