Today’s News
China’s services sector growth slowed in September, as new business expansion hit its weakest pace in nearly a year, despite a boost in export demand, according to a private-sector survey released on Monday.
Image Source: South China Morning Post
China’s Slowing Domestic Demand
The Caixin/S&P Global services purchasing managers’ index (PMI) fell to 50.3 in September from 51.6 in August, marking its lowest reading since September 2023. A reading above 50 indicates growth, while below 50 signals contraction.
New business inflows increased only slightly, with growth slowing to the weakest pace in 11 months. However, demand from overseas picked up, with new business from abroad rising at the fastest rate in three months.
Despite the modest growth in new business, capacity pressures remained evident as companies struggled to keep up, leading to an increase in backlogged work and a rise in hiring. Employment in the services sector expanded, reversing a decline seen in August.
Survey respondents reported higher input costs, driven by rising material, labor, and energy expenses, but businesses were hesitant to raise prices due to mounting cost pressures. Overall business confidence fell to its lowest level since March 2020, with companies expressing concerns about rising competition and uncertainties in the global economic outlook.
Image Source: Business Today
Combined with the manufacturing PMI, the Caixin/S&P Global Composite PMI also dropped to 50.3 in September, down from 51.2 in August.
“Across the board, the latest macroeconomic data have fallen short of market expectations,” said Wang Zhe, economist at Caixin Insight Group.
“Insufficient effective domestic demand remains a prominent issue, with significant pressure on employment and weak optimism constraining people’s willingness and ability to spend.”
Last week, China’s top leaders acknowledged the economy is facing “new problems” and called for fresh policies to “forcefully” stimulate growth. They also urged efforts to stabilize the struggling property market and deploy “necessary” fiscal spending.
In response, China’s central bank introduced its most aggressive monetary easing measures since the pandemic, with further policy support expected soon.
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