China’s August services activity slows amid sluggish demand: Caixin PMI

China’s services activity expanded at the slowest pace in eight months in August, a private-sector survey showed on Tuesday, as weak demand continued to dog the world’s second-largest economy and stimulus failed to meaningfully revive consumption.

The Caixin/S&P Global services purchasing managers’ index, or PMI, dropped to 51.8 in August from 54.1 in July, the lowest reading since December when Covid-19 confined many consumers to their homes. The 50-point mark separates expansion from contraction in activity.

The data broadly aligned with the official services PMI released last week, which showed the sector continued to trend downwards. Even the record number of passenger railway trips and stellar box office earnings during the summer failed to drive up the reading.

Although both the official and the Caixin manufacturing PMIs beat market expectations and showed an increase from July to August, softening services activity still weighs on the economy amid sluggish demand and a property downturn.

Caixin/S&P’s composite PMI, which includes both manufacturing and services activity, edged down to 51.7 from 51.9 in July, marking the eighth straight month of expansion, albeit the weakest since January.

“The marginal slowdown in the services sector’s supply and demand expansion offset the improvement in manufacturing production and demand,” said Wang Zhe, an economist at Caixin Insight Group, adding “there was still considerable downward pressure on the economy.”

Beijing has released a series of measures in recent months to revive slowing growth, with the central bank and top financial regulator last week easing some borrowing rules to aid homebuyers. But analysts warn these measures may struggle to move the needle amid a slowing labour market recovery and uncertain household income expectations.

The increase in new orders in the services sector was below the average seen for 2023 to date, partly due to weaker foreign demand, according to Caixin services PMI.

New export business fell for the first time since December amid sluggish overseas conditions.

Business confidence for the 12-month outlook reached a nine-month low.

Though growth momentum slowed, companies continued to add staff last month due to higher business requirements and plans to expand capacity.

Outstanding business meanwhile accumulated further, with the rate rising to the highest since January.

On the prices front, the rate of input cost inflation cooled to a six-month low, while selling prices increased at the slowest rate since April.