China’s services sector activity expands at slower pace amid rising inflation pressures, Covid-19 outbreaks

  • Caixin/Markit services purchasing managers’ index (PMI) fell to 52.1 from 53.8 in October
  • On Sunday, China’s official non-manufacturing PMI, which measures business sentiment in the services and construction sectors, fell to 52.3 from 52.4 in October

Activity in China’s services sector expanded at a slower pace in November amid rising inflationary pressures and continuing small-scale coronavirus outbreaks, a private survey showed on Friday.

The Caixin/Markit services purchasing managers’ index (PMI) fell to 52.1 in November from 53.8 in October, but remained above the 50-point mark that separates growth from contraction on a monthly basis.

The readings in the private survey, which focuses more on small firms in coastal regions, tallied with those of an official survey, which also showed the expansion in the services sector lost some steam.

Analysts said the services sector, which has been slower to recover from the pandemic than manufacturing, is more vulnerable to sporadic coronavirus outbreaks and antivirus measures, clouding the outlook for a much anticipated rebound in consumption in the months to come.

China’s leisure and tourism businesses have been feeling the heat from the country’s zero tolerance coronavirus strategy to contain infections.

The country is currently battling a small-scale outbreak in Inner Mongolia.

Firms’ input prices also expanded for the 17th month in a row and at the fastest pace since May due to rising labour and raw material costs. Prices charged also rose, but at a slower pace, pointing to margin pressures.

A subindex for new business rose, but at the slowest pace since August. Business expectations improved from the month before, however.

Caixin’s November composite PMI, which includes both manufacturing and services activity, fell to 51.2 from 51.5 the previous month.

“Policymakers should still focus on supporting small and midsize enterprises. They should also pay attention to problems including deteriorating job prospects, limited household income growth and weak consumer purchasing power,” said Wang Zhe, senior economist at Caixin Insight Group.

“Enterprises are still facing high cost pressures. Policymakers should take inflation seriously.”

Author: Reuters, SCMP

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