China’s services activity expands at quicker pace in July, lifted by summer travel season

China’s services activity expanded at a slightly faster pace in July, supported by a jump in business in the summer travel season, a private-sector business survey showed on Thursday, partly offsetting the drag from the weak manufacturing sector.

The Caixin/S&P Global services purchasing managers’ index (PMI) rose to 54.1 in July from 53.9 in June, marking an expansion of business activity across the services sector for the seventh straight month. The 50-point mark separates expansion from contraction in activity.

The data was in contrast to an official survey on Monday which showed services activity has continued to soften. Analysts said the different compositions of surveyed firms and methodologies may account for the divergence.

The world’s second-largest economy staged a solid rebound in the first quarter after strict coronavirus curbs were suddenly removed late last year, but the recovery has faded quickly in recent months as demand at home and abroad weakens.

“In terms of policies, the top priorities should still be guaranteeing employment, stabilising expectations and increasing household income,” said Wang Zhe, senior economist at Caixin Insight Group.

Companies said improved operating conditions, greater client numbers and new product releases had boosted sales at the start of the third quarter, according to the private survey. The subindex of new business picked up from June, but was still below the series average.

Analysts said summer travel could have helped with related consumption, although sales of some big ticket items remained tepid, making July’s picture of retail sales mixed.

“The number of customers since the beginning of summer has risen by 60 to 70 per cent compared to the same period last year,” said a receptionist surnamed Wu at a Hangzhou-based homestay service provider.

The uneven recovery of the services and manufacturing industries has been a prominent issue

Wang Zhe

Better sales encouraged firms to expand their payroll numbers at the fastest pace since March.

However, the level of positive sentiment among companies moderated to an eight-month low and fell below the series long-run trend.

A sustained rise in expenses and improved demand led to a further increase in prices charged by companies, although some said competitive market pressures had limited their pricing power.

Caixin/S&P’s composite PMI, which includes both manufacturing and services activity, fell to 51.9 from 52.5 in June, marking the seventh straight month of expansion. However, the rate of growth was the softest recorded since January.

“The uneven recovery of the services and manufacturing industries has been a prominent issue,” economist Wang said.

South China Morning Post