China’s services activity maintains robust growth in October

UniqueThis 20 Nov 2

A private gauge of China’s services sector activity maintained robust growth in October, hitting its highest level since July amid the weeklong National Day holiday and relaxation of social-distancing measures.

The Caixin China services purchasing managers index rose to 53.8 in October from 53.4 in September, Caixin Media Co. and research company IHS Markit said Wednesday. The gauge came in above 50, which separates expansion from contraction.

The improvement pointed to a different direction from the competing official PMI released earlier. The country’s official nonmanufacturing PMI fell to 52.4 from 53.2, indicating expansion in services sector activity, albeit at a slower pace.

Both business activity and total new orders expanded solidly at the start of the fourth quarter, according to Caixin. New export orders also returned to expansion and saw the steepest growth over the past three months, with a number of firms commenting that improved market conditions and increased customer demand had supported sales.

Despite the improvement, “the further recovery in conditions was accompanied by stronger inflationary pressures, with input costs rising at the fastest rate since July and output charge inflation quickening to a solid pace,” Caixin said. Input prices for service providers rose for the 16th straight month.

The job market for services continued to recover. Employment at services companies rose for the second month in a row.

“Supply and demand both recovered as disruptions from local Covid-19 outbreaks faded by the middle of October,” said Wang Zhe, an economist at Caixin Insight Group.

Despite October’s reading, the outlook for China’s services sector is overshadowed by the new resurgence of Covid-19 cases since last week across a dozen regions.