China Service Sector Continues To Expand In August

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China's services companies continued to recover in August from the recent wave of the pandemic underpinned by strong sales, survey results from S&P Global showed on Monday.

The Caixin services Purchasing Managers' Index came in at 55.0, down from 55.5 in July.

A score above 50.0 indicates expansion. Moreover, the rate of expansion was the second-quickest recorded since May 2021.

Companies linked higher business activity to improvements in customer demand and numbers, as disruption due to the pandemic and impact of restrictions continued to recede.

Total new business grew at the second steepest pace since October 2021. The upturn continued to be led by firmer domestic demand, as companies registered a further drop in export sales.

Staffing levels declined in August, the same pace of fall as seen in July as some workers left their jobs due to the pandemic. Rising customer demand and higher intakes of new work led to a renewed increase in outstanding business.

On the price front, the survey showed that service providers remained upbeat that activity levels would rise over the next year. Furthermore, the degree of positive sentiment edged up to its highest since November 2021.

The composite output index that combines the performances of manufacturing and services, fell for the second month in a row in August, slipping from 54.0 in July to 53.0.

The services activity continued to outperform manufacturing, though in both cases rates of expansion softened since July.

The economy is slowly recovering from a widespread outbreak of Covid-19 in the first half of the year, though it remains under pressure, Wang Zhe, a senior economist at Caixin Insight Group said.

While the central bank has recently cut key policy interest rates to guide banks to lower financing costs for companies and individuals, the effect will depend on market players' confidence about the future, Wang noted.

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