Economy Oct 09

China services sector extends expansionary run

Services industry expanded for fifth straight month as a sustained rise in overall client demand created jobs for second month in a row

China services sector extends expansionary run
The services sector has expanded for five straight months as China's recovery has slowly gathered pace. Afp photo.

(ATF) China's services industry expanded for the fifth straight month as a sustained rise in overall client demand created jobs for the second month in a row, data for September released on Friday showed.  

The Caixin China General Services Business Activity Index came in at 54.8 in September, up from August's 54.0, among the quickest recorded over the past decade. It was the sharpest rate of expansion in three months and well above the 50-mark that indicated expansion. A reading below 50 demarcates contraction.

“Consistent with the message from the National Bureau of Statistics' services PMI, the Caixin services PMI suggest an accelerated recovery of the services sector in September,” Goldman Sachs economists said in a note.

“Sub-indexes suggest higher overall new businesses, continued improvement in employment and lower inflationary pressures in the services sector.”

The services sector, which accounts for about 60% of the economy and half of urban jobs, had initially been slower to return to growth than large manufacturers, but the recovery has gathered pace in recent months as Covid-19 restrictions on public gatherings lifted.

Firms hired more for the second month in a row, although at a still modest rate, indicating some recovery in a labour market that has been hit by sharp falls in demand and epidemic restrictions earlier in the year.

The overall new business index rose to 53.6, from 52.9 in August but new export businesses fell to 48.4 in September from 49.1 in August.

Holiday travel up but well below last year

China estimated that 13 million railway passenger trips were made on October 1, the start of the Golden Week holiday, the highest for a single day since the coronavirus outbreak began in February but this figure is still well below the 17 million trips made on the same day last year.

The labor market signaled continued improvement - the employment sub-index was unchanged at 50.8 in September, back to the pre-coronavirus level in late last year.

And business optimism remains elevated as the economy extends its recovery from the Covid-19 lockdowns, with a sub-index for confidence in the year rising from August.

“Companies remained confident about the economic outlook. In September, the gauge for business expectations rose further into expansionary territory. Companies remained positive about the ongoing economic recovery and the effective control of the epidemic," Wang Zhe, a senior economist at Caixin Insight Group, said.

Recent economic indicators ranging from trade to producer prices have all suggested a further pick-up in the industrial sector, adding to the demand recovery from the coronavirus-induced slump.

Many analysts expect China to be the only major economy to mark positive annual growth in 2020, although at decades-low levels.