China’s services sector grew slightly slower due to higher costs in April, but there’s still optimism with increased new orders and positive business sentiment, suggesting a continued economic recovery, according to a recent private sector survey.
However, job opportunities continued to decline.
The Caixin/S&P Global services purchasing managers’ index (PMI) dropped marginally to 52.5 from 52.7 in March, showing ongoing expansion for the 16th straight month.
“While the Caixin services PMI edged down last month, it dropped by less than its official counterpart, and the survey data for April is still consistent with some improvement in momentum since the start of the year,” said Julian Evans-Pritchard, Head of China Economics at Capital Economics.
“We think the current cyclical recovery will continue in the near term thanks to robust exports and fiscal stimulus. But the economy remains vulnerable to trade tensions and a pullback in policy support.”
Despite this growth, China faces challenges like a lingering property market slump and subdued consumer demand.
While service businesses improved, they weren’t eager to expand, leading to weak job growth.
Costs rose slowly, hinting at minimal inflation. Unlike official data that focuses on big state-owned companies, Caixin’s survey covers smaller, private firms, revealing a differing pace of growth.
Although the services sector has been growing for over a year, economists remain cautious due to deflationary risks and the property market’s instability.
China aims for 5 per cent growth, but achieving this amidst uncertainties is tough, especially with Fitch’s negative outlook on China’s long-term prospects, citing concerns about its heavy reliance on real estate.
In essence, while there’s optimism, China’s economy remains complex. Policymakers must balance growth goals with stability amid ongoing challenges.
(The FTSE 100 daily report won’t be available on Monday, May 6 due to a bank holiday.)