BEIJING: Activity in China’s services sector in January grew at the slowest pace in five months as a rise in local COVID-19 cases and lockdown measures hit new business and consumer sentiment. consumers while employment fell, a private survey found on Monday (7 February) .
The Caixin/Markit services purchasing managers’ index (PMI) fell to 51.4 in January – the lowest since August – from 53.1 in December. The 50 point mark separates growth from contraction on a monthly basis.
The weak reading is likely to bolster market expectations that policymakers need to deploy more supportive measures to stabilize the faltering economy. China’s central bank has already started cutting interest rates and injecting more liquidity into the financial system to reduce borrowing costs, and further easing measures are expected in the coming weeks.
A sub-index for new business in the survey came in at 51.1 in January, slower than the long-term series average and below 52.5 the previous month.
Some service providers attributed the slowing growth to COVID-19 outbreaks. In addition, rising overseas cases weighed on foreign demand, pushing new export orders into contracting territory for the first time in four months.
This led to a further decline in employment, marking the first drop in the data series since August last year, the survey showed.
“In December and January, the resurgence of COVID-19 in several regions such as Xian and Beijing forced local governments to tighten epidemic control measures, which restricted the production, transportation and sale of goods. “said Wang Zhe, senior economist at Caixin Insight Group. , in a statement accompanying the release of the data.
“This year, policymakers should focus on stability. They should prioritize improving employment and optimizing the structure of the economy.”
The world’s second-largest economy got off to a strong start in 2021, rebounding from the pandemic-induced recession of 2020, but lost momentum in early summer, weighed down by mounting debt problems in the housing market and disease outbreaks. of COVID-19.
The survey also showed that inflationary pressures persisted for Chinese service companies. Input costs rose at a faster rate in January, while prices accelerated to a three-month high, with some companies passing on higher costs to customers.
Confidence in the year ahead, while still elevated, slipped to a 16-month low amid uncertainty over the pandemic.
Caixin’s composite PMI for January, which includes both manufacturing and services activity, came in at 50.1, also the lowest since August and down from 53 the previous month.
China’s economy grew 4.0% in the fourth quarter from a year earlier, its weakest expansion in a year and a half.