CGTN | 04-Jul-2020
China’s services sector expanded at the fastest pace in over a decade in June as the easing of coronavirus-related lockdown measures revived consumer demand, a private survey showed on Friday.
The Caixin/Markit services Purchasing Managers’ Index (PMI) rose to 58.4, the highest reading since April 2010, from May’s 55.0, pulling further away from the trough hit in February as the coronavirus lockdown paralyzed the economy. The 50-mark separates growth from contraction on a monthly basis.
The rebound suggests China’s overall recovery is becoming more balanced and broader based as life slowly returns to normal in one of the world’s biggest consumer markets, though analysts believe it will take months for activity to return to pre-crisis levels. The services sector accounts for about 60 percent of the economy and half of the urban jobs and includes many small, private companies that had been slower to recover initially than large manufacturers.
“This (latest survey) suggests the services sector’s recovery is gaining traction,” said analysts at Nomura, which recently raises its forecast for China’s second-quarter GDP growth to 2.6 percent year-on-year from 1.2 percent. The Caixin survey showed a sub-index for new business received by Chinese services firms rose to 57.3 from 55.8 in May, with the rate of growth accelerating to the fastest since August 2010.
Services companies were also able to raise their prices slightly, ending a six-month streak of discounting as firms promote sales, while business confidence over the next 12 months strengthened to a three-year high.
But employment remained stuck in contractionary territory for the fifth consecutive month, with corporate headcounts falling at a faster pace than in May, highlighting the immense pressure facing Chinese policymakers this year as they vow to stabilize the labor market.
“Although businesses were optimistic about the economic outlook, they remained cautious about increasing hiring, with employment in both the manufacturing and services sectors shrinking,” said Wang Zhe, Senior Economist at Caixin Insight Group, in a statement accompanying the data release.
“Addressing the employment problem requires not only macro policies to further promote work resumption, but also more targeted relief measures introduced by governments to tide companies over.” The official PMI released by the National Bureau of Statistics showed on Tuesday showed that activity in China’s services sector expanded for a fourth consecutive month, suggesting a rapid recovery in consumer confidence.
The PMI offers an early snapshot of the state of the economy during the month ahead, quizzing operators on issues like hiring, export orders, and inventory. (With input from Reuters)
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