A recent survey conducted by financial services platform, Caixin Insight Group, has reportedly revealed that the service sector of China witnessed a slight slowdown amid the recent COVID-19 outbursts. However, business confidence has reached a nine-month high, providing a sigh of relief to the struggling economy.
The Caixin services PMI (purchasing managers' index) from the 15-month high of 55.5 in July dropped to 55.0 this month. But it fared well in expansionary territory.
This reading is similar to the one by the country’s official survey, which was released last week and indicated a slow expansion in the service sector, which may be due to the prolonged COVID-19 disruptions coupled with the worst heatwaves the country is facing.
While total new orders registered a growth for the third consecutive month, foreign demand remained low as the new export business sub-index shrunk for the eighth month consecutively with travel curbs still in place.
Even amid growing new businesses, companies are still laying off staff.
The services sector, which suffered a significant setback due to a sharp decline in the property market, is one of the most vulnerable industries under China’s zero-COVID policy.
Service providers have to deal with rising costs as the sub-index of input prices hikes at the fastest clip in four months, along with rising labor, raw materials, food, and marketing costs. However, they could only pass on a slight increase in their fees.
China barely escaped a contraction in this year’s second quarter amid widespread Covid-led lockdowns, and the nascent signs of a recovery during the summer quickly died down due to new virus outbreaks and travel restrictions.
The country’s nationwide railway travel also saw an eight-year decline this month.
Analysts expect that even tougher anti-virus measures will be making their way into the major Communist Party Congress later this year, with multiple megacities having tightened containment measures this week.
the sluggish growth in the services sector caused an unexpected contraction in factory activity resulting in Caixin’s composite PMI for this month, which comprises both services and manufacturing activity, having dropped from 54.0 last month to 53.0.