China’s Nov services activity accelerates on boost from new orders
© Reuters. FILE PHOTO: People dine at a restaurant in Beijing, China September 5, 2023. REUTERS/Tingshu Wang/File Photo
BEIJING (Reuters) – China’s services activity expanded at a quicker pace in November, a private-sector survey showed on Tuesday, as the upturn in new businesses were the best seen for three months amid reports of firmer market conditions.
The findings present a mixed picture of the vast services sector as an official survey last week showed the sector unexpectedly contracted for the first time since December last year, prompting calls for more stimulus measures.
The Caixin/S&P Global services purchasing managers’ index (PMI) rose to a three-month high of 51.5 in November from October’s 50.4, but it remained softer than the long-run series average.
“Both services supply and demand expanded, as the market continued to heal,” said Wang Zhe, economist at Caixin Insight Group.
Taken together with the better-than-expected Caixin manufacturing PMI, Wang said the world’s second-biggest economy showed signs of an encouraging recovery, with steady growth in consumer spending, solid improvement in industrial production and an uptick in market confidence.
Analysts say the different survey sizes and composition of surveyed companies might explain the discrepancy between the Caixin and official PMI readings.
Caixin/S&P’s composite PMI, which includes both manufacturing and services activity, grew to 51.6 from 50.0 in October, marking the strongest reading since August.
Service providers were upbeat about business activity over the year ahead in November and the degree of positive sentiment picked up for the first time in five months.
However, Oxford Economics lead economist Louise Loo said while China heads into 2024 with relatively loose policy settings, the country’s private sector confidence was constrained by property pessimism.
Property sales, investment, and home prices extended declines in October and piled more pressure on authorities to step up efforts to prevent contagion across the broader financial sector.
The country’s central bank governor last week said monetary policy will remain accommodative to support growth but urged structural reforms over time to reduce the economy’s reliance on infrastructure and property.
According to the Caixin services survey, employment fell for the first time since the start of 2023 as some firms maintained a cautious approach to hiring.
November also witnessed a further slowdown in the rate of input cost inflation across China’s service sector.
“China is no longer the spender of last resort for the global economy, so don’t expect robust reflation,” Oxford Economics’ Loo said.