Economic Indicators

China’s Private Services Sector Accelerates in July, But COVID-19 Threats Remain

By Gina Lee – China’s services sector recorded accelerating growth in July, even as the country’s latest outbreak of COVID-19 threatens to hamper the country’s economic recovery from COVID-19.

The Caixin services purchasing managers’ index (PMI), released earlier in the day, was 54.9 in July, higher than the 50.3 figure from the previous month and was at its highest point since May 2021. The figure was above the 50-mark indicating growth.

The Caixin manufacturing PMI, released on Monday, was a lower-than-expected 50.3 in July.

The better reading from the private survey, whose focus is more on smaller firms in coastal regions, contrasted with those from the official survey released during the previous week. The non-manufacturing PMI was 53.3, and the manufacturing PMI was 50.4, both lower than expected.

The service sector has trailed its manufacturing counterpart in recovering from COVID-19 but had slowly been closing that gap as consumption increased. However, China’s latest outbreak of COVID-19 cases, which has spread to nearly half of the country’s 32 provinces within just two weeks, threatens to put a big dent into the country’s economic recovery.

The July readings were buoyed by the successful containment of COVID-19 cases in southern China, although the impact from the latest round of outbreaks since late July was likely to hurt PMI readings in the next month, according to Caixin Insight Group senior economist Wang Zhe.


«The economy still faces enormous downward pressure, and we need to ensure business owners remain confident,» Wang added.

China’s latest COVID-19 outbreak started with the city of Nanjing confirming its first cases involving the Delta variant of the virus. It has since to numerous cities in southern China and a few northern ones, including Beijing. One sector already feeling the impact is tourism, as the reimplementation of restrictive measures to curb the outbreak’s spread will dampen the peak summer travel demand.

The survey also said new export orders fell again as other countries struggle with their own COVID-19 outbreaks. However, business confidence picked up, even though it was slightly lower than its long-term average. On the jobs front, service sector employment returned to slight growth in July as companies aimed to control costs.


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