China Services Sector Holds Strong Amid Cost Challenges: Caixin Survey

Services sector China: The services sector has shown a minor slowdown in its expansion, largely attributed to increasing costs in China. However, there are positive signs indicating a continued economic recovery. The Caixin/S&P Global services purchasing managers' index (PMI) remained in expansionary territory for the 16th consecutive month, although it dipped slightly to 52.5 from March's 52.7.

Despite challenges like a prolonged property slump and subdued domestic demand, China's economy outperformed expectations in the first quarter. Strong new business growth, particularly in exports, drove optimism among service providers, pushing business sentiment to its highest point this year. However, rising costs for materials, labour, and energy persist, prompting companies to pass on these increases to customers.

While the Caixin survey highlights the resilience of smaller, export-driven firms, it contrasts with the broader official PMI, which signalled a slowdown in services sector activity last month. Nonetheless, the composite PMI, which tracks both services and manufacturing, showed a modest increase to 52.8, indicating a robust overall performance.

Structural reforms alongside targeted stimulus measures are seen as vital for ensuring a strong and sustainable revival in China's economy amidst lingering challenges.

With Reuters Inputs