By Gina Lee
Investing.com – China’s services sector activity, but at its slowest pace in ten months, in February, a private sector survey said on Wednesday. This was as companies dealt with low demand and higher costs, prompting them to cut jobs,
The Caixin services purchasing managers’ index (PMI), released earlier in the day, stood at 51.5 against January’s 52 figure. It follows the Caixin manufacturing PMI, released earlier in the week, which was 50.9 against the 51.5 in forecasts prepared by Investing.com and January’s 51.5 figure.
Data released earlier in the week by the National Bureau of Statistics said the manufacturing PMI released on Sunday was 50.6, below the 51.1 in forecasts prepared by Investing.com and down from January’s 51.3 figure. The non-manufacturing PMI was 51.4, also down from January’s 52.4.
The survey also said that a sub-index for employment, which stood at 47.9, slipped into contraction after six months of growth as companies laid off workers. New export business also dropped after three months of expansion.
The loss of momentum is attributable to a fresh outbreak of COVID-19 cases in the country at the beginning of 2021. COVID-19 also continued to dent overseas demand.
“The momentum of post-epidemic services recovery further weakened … service providers cut staff to reduce costs as weakened market sentiment had a knock-on effect on the job market,” Caixin Insight Group senior economist Wang Zhe said in a statement accompanying the data release.
The services sector, slower to recover initially from COVID-19 than the industrial sector, has also more vulnerable to the strict social distancing restrictions implemented to curb the outbreak. The Lunar New Year holidays in February, when many workers return to their hometowns from the cities, also saw limited travel thanks to COVID-19.
However, investors expect a strong rebound in full-year growth with China reporting no domestic COVID-19 cases since early February. Chinese services firms also remained optimistic about the year ahead, with business expectations over the next year rising from January.