According to the report from Caixin/S&P Global, the growth of activity in the service sector accelerated in March (for the first time in three months), confirming economists' forecasts and recording the 15th consecutive monthly expansion, helped by an increase in new orders. Business confidence also improved, although employment levels declined amid evidence of reduced capacity pressures.
The service PMI rose to 52.7 points in March from 52.5 points in February. Although the rate of expansion was faster, it remained below the long run series average.
The report also showed that thanks to improving underlying demand and efforts to boost new orders, the pace of new business expansion was the fastest since December last year. Export business also increased at a slightly faster rate in March, the quickest in nine months, aided by better external demand conditions and promotional activities. Meanwhile, employment in the service sector declined again in March, although the pace of contraction slowed compared to February and was only slight. According to survey respondents, resignations among staff and redundancies to improve productivity resulted in the fall in payroll numbers. As for the inflationary situation, average input prices continued to rise amid evidence of higher raw material, labor and transport costs. However, the rate of inflation fell further below the series average in March. This enabled service providers to raise selling prices at a slower rate, though the rate of charge inflation remained slightly above its long-term trend. Meanwhile, the sub-index of future business activity increased for the first time in three months amid hopes that new product lines, expansion plans and increased customer budgets will help boost sales.
The survey also showed that overall private sector activity growth was the strongest since May 2023. The composite output index advanced to 52.7 in March from 52.5 in February.