China’s services sector growth slowed down slightly in March due to rising costs, but new business and business sentiment improved, fueling hopes for a sustained economic recovery. The Caixin/S&P Global services Purchasing Managers’ Index (PMI) fell from 52.7 to 52.5, but remained in expansionary territory for the 16th consecutive month.
Wang Zhe, a senior economist at Caixin Insight Group, pointed out that the strong start to the year aligns with consistent expansion seen in both the manufacturing and services PMIs. New business reached its highest level since May of last year, with growth in new export orders accelerating to the fastest pace in 10 months, driven by improved overseas demand and tourism activity. This led to increased business confidence among Chinese service providers for the year ahead.
Despite this, companies faced cost pressures such as rises in input prices for materials, labor, and energy. However, they were able to increase prices for customers. There was reluctance to fill vacancies left by departing employees. Wang emphasized the need for policies to be implemented effectively and promptly to maintain current economic recovery momentum and improve market expectations.
The composite PMI increased last month from 52.7 in March to 52.8, marking the fastest pace since May 2023. China’s economic recovery post-Covid has been challenging due to confidence and demand issues stemming from a prolonged property sector crisis. While the first-quarter GDP report showed pockets of strength, economists generally believe a robust revival is still some way off.
Investors and analysts suggest that China’s structural reform efforts should be accompanied by increased stimulus measures to support a stronger and sustainable economic recovery.
Overall, despite rising costs impacting China’s services sector growth slightly in March, there were positive signs such as an increase in new orders and business sentiment improvement supporting hopes for a sustained economic recovery.
According to Wang Zhe of Caixin Insight Group, the strong start to the year is consistent with the expansion seen in both manufacturing and services PMIs.
New business reached its highest level since May of last year thanks to growth in new export orders accelerating at its fastest pace in ten months due to improved overseas demand and tourism activity.
This led Chinese service providers boosting their confidence for the year ahead.
However, companies faced cost pressures such as rising input prices for materials, labor