China’s services recover stronger than expected: Caixin PMI
Several cities, including Shanghai, scaled back Covid restrictions last month as cases fell, allowing more shops to open, consumers to spend, and supply jams to ease. The country also recently said it would halve the quarantine time for inbound travellers.
China’s services activity beat expectations in June and jumped to the highest level in nearly a year, a private survey showed in the latest sign that easing Covid outbreaks and restrictions have boosted consumer sentiment.
The Caixin Services Purchasing Managers’ Index soared to 54.5 in June from 41.4 in May, according to a statement on Tuesday from Caixin and S&P Global. That is the highest reading since July 2021, and far surpassed the median estimate of 49.6 in a Bloomberg poll of economists. A reading above 50 indicates expansion.
Several cities, including Shanghai, scaled back Covid restrictions in June as cases fell, allowing more shops to open, consumers to spend, and supply jams to ease. The country also recently said it would halve the quarantine time for inbound travellers.
“Regional Covid outbreaks were brought under control, which contributed to the services sector’s recovery,” said Wang Zhe, senior economist at Caixin Insight Group, in a statement accompanying the data.
Last week, the official gauge of non-manufacturing activity showed a jump to 54.7 in June, the highest in more than a year and well above a consensus forecast. The Caixin index focuses more on smaller firms, while the official PMI tracks larger companies.
Wang noted, however, that the recovery in supply and demand “did not spill over into the shrinking labour market, with companies still cautious about expanding hiring as they sought to keep costs down.”
Sentiment could dive again given the threat of repeated restrictions should there be more virus flare ups across the country. Infections surged over the weekend in parts of the eastern province of Anhui, where officials have issued lockdowns to try and stop the virus from spreading.
President Xi Jinping, meanwhile, last week reaffirmed the country’s commitment to its Covid Zero strategy, saying it was the most “economic and effective” policy for China. BM
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