China’s services sector activity growth slowed sharply in January, a private sector survey showed on Wednesday, as the latest coronavirus outbreak hit sentiment hard ahead of the Lunar New Year holiday period.
A reading above 50 indicates growth in sector activity, while a reading below represents contraction. The higher the reading above 50, the faster the pace of expansion.
The Caixin survey mainly covers smaller, private sector firms and its results mirror the drop in the official service sector sentiment released on Sunday. Together, the data underscores the fragility of the Chinese service sector ahead of the Lunar New Year holiday period, which accounts for a large share of the nation’s consumer spending as million of urban workers return to their hometowns and spend large sums on travel, gifts and food.
The Caixin data are likely to reinforce expectations that weakness in the service sector will weigh on first quarter growth, with some analysts having already revising down their forecasts before the latest figures.
The data will also support calls for Beijing to avoid any major reduction in its economic support measures in the near future.
Earlier this week, the official non-manufacturing PMI, which measures sentiment in the service and construction sectors, fell to 52.4 in January from 55.7 in December.
Within the official non-manufacturing PMI, the sub-index for the service sector business activities index fell to 51.1 from 54.8, the largest drop since the spring last year at the height of the original coronavirus outbreak.
Caixin’s composite manufacturing and services PMI, also released on Wednesday, fell to 52.2 in January, from 55.8 in December.
China’s official manufacturing PMI also fell to 51.3 in January from 51.9 in December, while the Caixin/Markit manufacturing PMI fell to 51.5 in January, which was the lowest since June.
China’s economy grew by 2.3 per cent in 2020, the lowest growth rate since 1976, but it is expected to be the only major economy to have expanded last year.
The economic rebound last year was highlighted by a significant acceleration over the last three months of 2020, when China’s economy grew by 6.5 per cent from a year earlier, ahead of analysts’ forecasts of 6.2 per cent growth and in line with the growth rate at the end of 2019, before the original coronavirus outbreak.
- Caixin/Markit services purchasing managers’ index (PMI), a gauge of sentiment among smaller, private firms, fell to 52.0 in January from 56.3 in December
- Earlier this week, the official non-manufacturing PMI, which measures sentiment in the service and construction sectors, fell to 52.4 in January from 55.7 in December
Source SCMP