China’s services activity growth hits 8-month low, Caixin PMI shows

10:00 pm Tuesday, July 02nd, 2024

BEIJING (Reuters) – China’s services activity expanded at the slowest pace in eight months and confidence hit a four-year low in June, dragged by slower growth in new orders, a private-sector survey showed on Wednesday, suggesting more economic stimulus is needed.

The Caixin/S&P Global services purchasing managers’ index (PMI) eased to 51.2 from 54.0 in May, marking the lowest reading since October 2023 but remaining in expansionary territory for the 18th straight month. The 50-mark separates expansion from contraction.

The survey, which covers mostly private and export-oriented companies, aligned with a broader official PMI released on Sunday that showed activity in the services sector plumbed a five-month low.

The world’s second-largest economy has reported patchy growth in recent months, reinforcing calls for more policy support to achieve an ambitious growth target of around 5%.

The new orders subindex fell to 52.1 in June from 55.4 the previous month. Overseas demand also eased slightly even on top of strong exports in May.

Business confidence levels eased to the lowest level since March 2020 with concerns about the global economy and rising competition.

Service providers were scaling back hiring again last month after adding employment in May.

But slower rates of inflation for both input and output prices offered a respite to business owners who were grappling with higher input material, labour and transport costs.

The Caixin/S&P’s composite PMI, which tracks both the services and manufacturing sectors, fell to 52.8 from 54.1.

Markets are now focused on a leadership gathering in the middle of July, known as the third plenum, which may announce some reforms.

Measures that redistribute income from central authorities to local governments, thus reducing their reliance on land sales, will top the agenda of the gathering, according to policy advisers.

“Fiscal and tax reforms should focus on creating more optimistic expectations among market participants,” said Wang Zhe, senior economist at Caixin Insight Group. (This story has been corrected to fix the confidence milestone to a four-year low, in paragraph 1)

(Reporting by Liangping Gao and Ryan Woo; Editing by Sam Holmes)