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China's Services Sector Slows As The Recovery Stalls, According To The Caixin PMI

China's Services Sector Slows As The Recovery Stalls, According To The Caixin PMI
According to a private sector survey released on Wednesday, China's services activity grew at the weakest rate in five months in June as weaker demand slowed the post-pandemic recovery's momentum.
The purchasing managers' index (PMI) for services from Caixin/S&P Global dropped to 53.9 in June from 57.1 in May, the lowest result since January when COVID-19 ravaged the nation after authorities abandoned anti-virus controls. Activity is either expanding or contracting at the 50-point threshold.
The data showed a slowdown in service sector activity as demand for in-person services declined, broadly tracking the government's official PMI issued last week.
The world's second-largest economy lost momentum in April and June after expanding faster than forecast in the first quarter due to steepening deflation, high youth unemployment, and weak international demand.
According to the Caixin PMI, business activity and new orders both increased at noticeably slower rates in June compared to May. Although it decreased, new export business growth remained active.
At the conclusion of the second quarter, service companies reported a significant increase in input costs, even though the rate of inflation had barely moved since May. In contrast, service providers' pricing had only slightly increased in June.
Surprisingly, businesses' optimism for the next 12 months increased as they anticipated better economic circumstances and more new jobs to support growth.
Although it increased to a three-month high, the rate of employment creation in the services sector remained modest overall. The sector employs about half of all Chinese workers.
The manufacturing and services component of Caixin/S&P's composite PMI decreased from 55.6 in May to 52.5 this month, indicating the sixth consecutive month of growth.
"Employment contracted, deflationary pressure mounted, and optimism waned in the manufacturing sector," said Wang Zhe, senior economist at Caixin Insight Group. "Meanwhile, the services sector continued a post-COVID rebound, but the recovery was losing steam."
As the second half of the year gets underway, Nomura Chief China Economist Ting Lu stated in a report on Monday that there is increasing evidence of an economic double-dip.
In mid-July, China announces its June activity indicators and second-quarter GDP figures.

Christopher J. Mitchell

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