China’s services sector growth fell to the lowest in 14 months

The activity in China’s services sector slowed significantly in June, as resurgence of coronavirus cases in the south of the country, negatively affected sector’s growth.

A private survey – Caixin services Purchasing Managers’ Index- fell to 50.3 in June, hitting the lowest in 14 months, from May’s 55.1 figure, after improvement in consumption in past few months boosted the activity in China’s services industry.

Despite strong fall in June, the index remains just above the 50 threshold which separates growth from contraction.

The survey, believed to focus more on smaller companies, made more significant drop compared to country’s official services sector gauge, which also pointed to slowdown last month but remained well in expansion territory.

Slowdown in services comes along with weaker performance in the manufacturing sector, suggesting that strong demand during Covid have peaked and robust post-pandemic economic recovery is starting to moderate.

The survey showed that outlook for services providers for the coming year fell to the lowest in nine months despite the government’s reaction to contain new wave of coronavirus cases, as services industry is still sensitive to regional virus resurgences that prompted companies to reduce staff in June for the first time in four months.

Easing in inflationary pressures was the bright spot in the survey, resulting in the rise of input costs at a slowest pace in nine months, while service companies cut their prices charged to attract new business, for the first time in nearly one year.