China Service Sector Rebounds In June

chinapmi jun05 05jul22 lt

China's service sector logged a sharp rebound in June as the easing of pandemic related restrictions boosted demand, survey results from S&P Global showed on Tuesday.

The Caixin services Purchasing Managers' Index rose more-than-expected to 54.5 in June from 41.4 in May. The reading was forecast to advance moderately to 49.7.

The upturn ended a three-month period of falling output, with the rate of expansion the quickest recorded since July 2021.

A return to more normal business conditions and higher client numbers drove a renewed increase in overall new business. However, export orders dropped slightly in June.

Although employment across service sector continued to decline in June, the rate of job shedding was the softest seen for three months.

At the same time, capacity pressures appeared to ease in June, with outstanding business expanding at only a marginal rate.

On the price front, the survey showed that input price inflation rose at the slowest pace in the current 24-month sequence of rising costs. Prices charged by services companies also increased at a slower pace, as efforts to boost competitiveness and attract sales restricted overall pricing power.

Further, firms were upbeat about the business outlook. That said, the degree of confidence was little changed from May and remained below the series average.

The composite output index advanced sharply to 55.3 from 42.2 in May as both manufacturers and service providers reported strong upturns in output.

"Restoration in the post-pandemic era remained the focus of the current economy, yet its foundation still had some weaknesses," said Wang Zhe, a senior economist at Caixin Insight Group. Deteriorating household income and expectations caused by a weak labor market dampened the demand recovery.

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