The latest survey from Caixin showed that business activity in China's services sector continued to expand in June (for the 18th month in a row), but the pace of expansion was the weakest since October 2023. This contributed to a reduction in optimism levels. Firms were also cautious about hiring additional staff.
According to the report, the services PMI fell to 51.2 points from 54.0 points in May. Economists had expected a decline to 53.4 points. The main driver of the expansion in activity was a further increase in new orders in response to improved underlying demand conditions and the expansion of the range of services offered by firms. Export orders also rose in June. That said, the rates at which new and export business expanded both eased from May. As for the prospects for business activity in the services sector for the next 12 months, the corresponding index remained in expansion territory (above 50 points), but fell to the lowest level since March 2020, as some firms were concerned about increased competition and softer economic conditions. Employment in the service sector declined slightly in June amid resignations and redundancies, while backlogs accumulated in the service sector for the first time in five months. Whilst modest, the rate at which the volume of outstanding business rose was the fastest in just over two years. As for the inflationary situation, average input prices continued to increase in June. Chinese service providers have also increased selling prices. However, rates of inflation for both input and output prices both eased since May.