Strong recovery in May for China's services, private index shows

Business | 3 Jun 2020 11:19 am

China’s services sector returned to growth last month for the first time since January as the economy recovers from coronavirus-induced containment measures, although employment and overseas demand remained weak, a private survey showed.

The Caixin/Markit services Purchasing Managers’ Index (PMI) climbed to 55.0 in May from 44.4 in April, hitting the highest level since late 2010. The 50-mark separates growth from contraction on a monthly basis.

“Supply and demand both recovered quickly in the services sector,” said Wang Zhe, a senior economist at Caixin Insight Group. The measure for new business in the services sector reached its highest point in almost 10 years, returning to positive territory.

The return to expansion for China’s services sector, an important generator of jobs which accounts for about 60 percent of the economy, was driven by a sharp rise in domestic new business though export orders fell for the fourth month in a row.

Gauges for employment also continued to contract, although at a slower pace.

“Employment in the services sector remained worrisome,” said Wang. 

The sharp rise in the Caixin services PMI for May followed a rise in the Caixin manufacturing PMI, whose reading that month climbed to 50.7 from 49.4 in April.  The Caixin China Composite Output Index, which covers both manufacturing and service companies, came in at 54.5 in May, up from 47.6 the previous month, the survey showed.

The economy shrank by 6.8 percent in the first quarter from a year earlier, the first contraction since quarterly records began, and analysts believe it will be months before broader activity returns to pre-crisis levels.

“Demand for services recovered more strongly than that for manufacturing, which was more constrained by sluggish exports amid the ongoing impact of the pandemic’s spread outside China,” said Wang.

Caixin’s manufacturing PMI also showed a return to growth in May but at a slower pace than the services sector, hampered by weak global demand.

Prices charged by service providers were cut for the sixth straight month in May, while input prices dipped slightly.

The findings from the private sector survey, which focuses more on small, export-oriented companies, back an official survey on Sunday which showed momentum in the services and construction sectors quickening.

Caixin’s composite manufacturing and services PMI, also released on Wednesday, picked up to 54.5 in May from 47.6 in April.

“In general, the improvement in supply and demand was still not able to fully offset the fallout from the pandemic, and more time is needed for the economy to get back to normal,” said Wang.-Reuters/Caixin


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