Caixin/Markit services Purchasing Managers’ Index dropped to 50.3 in June
Growth in China’s services sector slowed well down last month, to the lowest point in 14 months, as coronavirus cases spiked in the southern area of the country.
This is according to the Caixin China General Services PMI survey which appears to show the second-biggest economy in the world may be hesitating on its road to recovery.
The Caixin/Markit services Purchasing Managers’ Index (PMI) dropped to 50.3 in June, well down from 55.1 in May, and its lowest level since April 2020.
However, it remained above the 50-level – anything below that marker represents a contraction.
In addition to a drop-off in the manufacturing sector, analysts said that China’s demand levels built up through the pandemic may have peaked. This is now causing the country’s rate of recovery to ease off.
An outbreak of the Delta variant of Covid-19 in Guangdong, an area where goods are both exported and manufactured, has seen a slow-down in consumer and business activity.
On a more positive note for China, the report showed an easing of inflation, which has been impacting company’s profit levels in recent months. “Composite input cost inflation softened to an eight-month low, while prices charged by Chinese companies increased only slightly,” the report said.
Commenting on the China General Services PMI TM data, Dr. Wang Zhe, Senior Economist at Caixin Insight Group said:
“The Caixin China General Services Business Activity Index came in at 50.3 in June, down from 55.1 the previous month. The June reading was the lowest since April 2020. The services sector expanded for the 14th month in a row in June, but the rate of expansion significantly slowed from the previous month.”
“Both supply and demand in the services sector expanded. The gauges for business activity and total new orders remained in positive territory for the 14th consecutive month in June, but both fell to the lowest in 14 months. The recent resurgence of Covid-19 in the Pearl River Delta had a certain impact on the services sector. External demand marginally improved. The gauge of new export business rose into positive territory, though the rate of expansion was marginal.”
“Employment in the services sector came under pressure. The resurgence of Covid-19, coupled with weakening supply and demand, hurt the labor market. The measure for employment fell into contractionary territory in June for the first time in four months, though the contraction was not sizable. Also, due to the weak market, service enterprises’ outstanding workload decreased.”
