BEIJING (Reuters) – Growth in China’s services activity accelerated in July, helped by new orders, although momentum in external demand slowed to the slowest pace in 11 months, a private sector survey showed on Monday.
The Caixin/S&P Global services purchasing managers index (PMI) rose to 52.1, from 51.2 in June, pointing to expansion for the 19th consecutive month. The index mainly covers private and export-oriented companies and the 50 mark separates expansion from contraction on a monthly basis.
In contrast, the official services PMI showed that the sector stagnated in July compared to the growth recorded in June, with the retail sales, capital market services and real estate services sectors shrinking.
The world’s second-largest economy grew much more slowly than expected in the second quarter and faces deflationary pressures and a prolonged slump in the property sector, with retail sales growth in June hitting the weakest pace since the start of 2023.
The Caixin/S&P survey showed that the new orders subindex rose to 53.3 in July from 52.1 in June, while the external demand indicator showed the smallest expansion since August 2023.
Service providers faced rising costs for raw materials, wages and freight, but employment rose at the fastest rate in 11 months.
The Caixin/S&P composite PMI, which tracks the services and manufacturing sectors, decreased compared to June, but remained in expansionary territory.
“Prices at the composite level remained weak, in particular on the sales front, further reducing corporate profit space,” said Wang Zhe, senior economist at Caixin Insight Group.
China’s leaders signaled last week that fiscal support for the rest of the year “will focus on consumption” with the aim of boosting incomes and social well-being, a move long advocated by many economists who say the The country’s economic model depends too much on investment.
“Without going beyond the reactive and incremental easing mode, however, confidence may still persist at low levels in the coming months,” Citi economists said in a research note.
“More significant domestic stimulus may only become plausible next year in the face of potentially stronger external headwinds,” Citi said.
(Reporting by Liangping Gao and Ryan Woo; Editing by Neil Fullick)
