China Service Sector Growth Softens In August

(RTTNews) - China's service sector continued to expand but the pace of expansion eased since July on softening incoming new business, a monthly survey compiled by S&P Global showed on Wednesday.

The headline Caixin services Purchasing Managers' Index posted 51.6 in August, down from 52.1 in July and economists' forecast of 51.9.

The index has remained above the threshold of 50.0 for the 20th straight month but growth in activity was among the lowest in the year-to-date.

The services activity growth was sustained by rising new business inflows. Respondents cited better underlying demand conditions and a widening of service offerings as reasons for the increase in new orders. New work inflows expanded at a softer pace compared to July.

On the other hand, export business grew at an accelerated pace as there was an uptick in overseas client interests.

Despite renewed accumulation of unfinished business, employment declined in August after rising in July. Job shedding occurred due to both resignations and redundancies.

Regarding inflationary pressures, the survey showed that cost inflation accelerated to the highest since June 2023 amid reports of rising input material, staff and transportation costs.

Selling prices dropped for the first time in seven months and the rate of fall in output prices was the most pronounced since April 2022.

Sentiment among service providers remained positive in August. The level of optimism rose for the second straight month to the highest since May.

The overall private sector remained in expansionary territory for the 10th straight month in August. The composite output index remained unchanged at 51.2 in August. Faster manufacturing output growth was offset by slower services activity expansion in August.

"Considering the government's ambitious annual economic growth target, the challenges and difficulties in stabilizing growth over the coming months will be substantial," Caixin Insight Group Senior Economist Wang Zhe said.

The economist observed that prominent issues such as insufficient domestic demand, significant uncertainties in external demand, and weak market optimism persist. Wang still sees room for fiscal and monetary policy adjustments.