China Services Activity Continues To Deteriorate In October

China’s service sector registered a sustained slowdown in activity as efforts to curb the spread of Covid-19 continued to disrupt business operations in October, survey results from S&P Global showed on Thursday.

The Caixin services Purchasing Managers’ Index fell to 48.4 in October from 49.3 in the previous month. The reading signaled that the sector contracted the most since May. The score was also below economists’ forecast of 49.2.

The survey showed that containment measures suppressed the demand. The slower fall in overall inflows of new work came despite a renewed downturn in foreign demand.

Efforts to expand staffing capacity and ramp up sales helped to boost employment. The increase in workforce numbers was the most marked since May 2021.

Meanwhile, businesses reported a third straight monthly increase in backlogs of work.

On the price front, the survey showed that average fees charged by services companies increased slightly. The rate of inflation was the fastest since February and above the series long-run average. At the same time, input cost inflation was the second-slowest in the past 14 months.

Looking ahead, October saw a slight uptick in firms’ expectations for activity over the coming year. Nonetheless, the degree of optimism remained relatively subdued.
The Caixin composite output index posted 48.3 in October versus September’s 48.5. This was the lowest reading since May.

“The spread of the coronavirus in many regions significantly restricts supply chains and dampens demand,” Wang Zhe, a senior economist at Caixin Insight Group said. “Ultimately, there is still tremendous downward pressure on the economy and the foundation for economic recovery is not yet solid.”

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