Caixin PMI shows China’s services industry activity slows in April but remains strong

BEIJING (Reuters) – The expansion of China’s service activities slowed slightly due to rising costs, but new order growth accelerated and business confidence rose steadily, supporting expectations for a sustained economic recovery. That’s what a private sector survey revealed on Monday.

The Caixin/S&P Global Services Purchasing Managers’ Index (PMI) fell to 52.5 from 52.7 in March, staying in expansion territory for the 16th consecutive month. The 50 mark separates enlargement and reduction.

The world’s second-largest economy grew faster than expected in the first quarter, but it still faces many challenges, including a prolonged real estate recession and weak domestic demand.

“The strong start to the year is consistent with Caixin’s manufacturing and services PMI, which has been in expansion territory for several consecutive months,” said Wang Zhe, senior economist at Caixin Insight Group.

Overall new business reached its highest level since May last year, while improving overseas demand and growth in tourism activity pushed growth in new export orders to the highest pace in 10 months.

This has lifted Chinese service provider business confidence over the next 12 months to its highest level this year.

Businesses continue to face some cost pressure from rising input prices for materials, labor, and energy, but the rate of increase remains below the long-term survey average. As a result, companies have been reluctant to fill vacancies created by retirements while raising the prices they charge customers.

“Consistent efforts should be made to implement early policies effectively and quickly, maintain the current economic recovery momentum, and ultimately improve overall market expectations,” Wang said. .

Economists say Caixin’s survey is more biased towards smaller export-led companies than the broader official PMI, which showed a sharp slowdown in service sector activity last month.

The Caixin/S&P composite PMI, which tracks both the services and manufacturing sectors, stood at 52.8 last month, up from 52.7 in March and the fastest pace for 2023 since May.

China’s economy has struggled to make a solid recovery post-COVID-19, mainly due to the knock-on effects on confidence and demand from the prolonged real estate sector crisis.

Some strong first-quarter GDP reports raised hopes for a steady recovery throughout the year, but economists say a strong recovery is still a long way off. It’s a common understanding.

Investors and analysts say China’s structural reform efforts need to go hand in hand with greater stimulus to foster a stronger and more sustainable economic recovery.

(Reporting by Gao Liangping and Ryan Woo; Editing by Shri Navaratnam)

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