China Service Sector Signals Renewed Fall In Activity

China’s service sector signaled a renewed fall in business activity in August as rising coronavirus infection at home and abroad weighed on operations and demand, survey results from IHS Markit showed on Friday.

The Caixin services Purchasing Managers’ Index fell to 46.7 in August from 54.9 in July. A reading below 50 indicates contraction in the sector.

According to official survey, released earlier this week, the non-manufacturing PMI, which measures the performance of the services and construction sectors, declined to 47.5 in August from 53.3 a month ago.

Total new orders received by services companies fell for the first time in 16 months in August, IHS Markit said. Service providers signaled a slight reduction in employment for the second time in the past three months.

Lower staffing levels and pandemic-related disruption led to a second successive monthly rise in the amount of outstanding business.

Input prices rose moderately, which was largely linked to higher staffing costs and increased transport fees. Meanwhile, output prices fell, following a solid increase in the previous month.

Services companies in China remained upbeat towards the year-ahead outlook in August, as firms generally anticipated activity would increase.

The composite output index posted 47.2 in August, down from 53.1 in July, to signal a renewed fall in overall business activity across China. Although moderate, it marked the first decline in output since April 2020, the survey showed.

“Official economic indicators for July were worse than the market expected, indicating mounting downward pressure on economic growth,” Wang Zhe, a senior economist at Caixin Insight Group said.

Authorities need to take a holistic view and balance the goals of containing Covid-19, stabilizing the job market, and maintaining stability in prices and supply, Wang added.

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