China services activity weakens to nine-month low in new hurdle
The Caixin China services purchasing managers' index (PMI) fell to 50.6 in June from 51.1 the month before, according to a statement from Caixin and S&P Global on Thursday (Jul 3). The median forecast of economists surveyed by Bloomberg was 50.9, with any reading above 50 indicating an expansion.
A weak jobs market and slower wage growth are keeping consumers on edge, even as a tariff truce with the US contributes to a rebound in trade and supports factory output. With the official services PMI showing a slight deterioration last month, the statistics bureau has also pointed to the fading boost from holidays in May.
A measure of new export business for services dropped in June, with job shedding recorded for the third time in the past four months, the latest PMI report showed. Companies cut their selling prices at the fastest pace since April 2022, likely as a result of intense market competition, it said.
'Employment declined,' said Wang Zhe, senior economist at Caixin Insight Group. 'Expansion in supply and demand slowed. Despite businesses' efforts to pursue new customers, growth in demand was limited.'
Signs of improvement in manufacturing and construction in June have created fresh doubt over the likelihood of further stimulus efforts by Beijing in the face of higher US tariffs.
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Property prices are struggling to bottom out, however, weighing on household wealth and confidence while persistent deflation saps consumer demand.
China's central bank issued a more optimistic assessment of the economy after its latest policy meeting. That's led some analysts to argue the urgency for stimulus has decreased in the near term, as the pace of economic expansion stays on track to hit the official target of around 5 per cent in the second quarter.
The official non-manufacturing PMI, which measures activity in construction and services, came in at 50.5 in June, slightly above the consensus forecast of 50.3. A sub-gauge for services has hovered around the 50-point line that separates contraction from expansion since the start of the year.
The private and official surveys cover different sample sizes, locations and business types, with the Caixin report focusing on small and medium-sized firms in the non-state sector.
China's services consumption accounts for only 18 per cent of economic output, according to JPMorgan Chase, less than half the share in the US.
'China's low consumption mainly reflects low service consumption, rather than weak goods consumption,' analysts at JPMorgan said in a report last month. BLOOMBERG
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