Despite a slight slowdown in expansion due to rising costs, China’s services sector experienced growth in new orders and improved business sentiment, according to a private sector survey released on Monday. The Caixin/S&P Global services Purchasing Managers’ Index (PMI) fell from 52.7 to 52.5 in March but remained in expansionary territory for the 16th consecutive month.
The strong start to the year is consistent with the expansion seen in both the manufacturing and services PMIs, said Wang Zhe, a senior economist at Caixin Insight Group. Overall, 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.
Although companies faced cost pressures such as rises in input prices for materials, labor, and energy, they were able to increase prices for customers. However, there was reluctance to fill vacancies left by departing employees. Wang emphasized the need for policies to be implemented effectively and promptly to maintain the current economic recovery momentum and improve market expectations.
The composite PMI increased from 52.7 in March to 52.8 last month, marking the fastest pace since May 2023. Despite pockets of strength shown in China’s first-quarter GDP report, economists generally believe that a robust revival is still some way off due to confidence and demand issues stemming from a prolonged property sector crisis. 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