China’s services activity expanded at the fastest pace in over a year in August, a private survey showed, as the summer travel season powered demand during what has otherwise been a relatively weak stretch for domestic consumption.
The RatingDog China services purchasing managers’ index rose to 53 from 52.6 in July, according to a statement published Wednesday by RatingDog and S&P Global. It was the highest reading since May 2024, and it topped the 52.5 median forecast of economists surveyed by Bloomberg. Any reading above 50 indicates an expansion.
Summer is typically a peak season for services such as tourism and entertainment. But China’s consumer sentiment has stagnated of late, with people’s view of the jobs market falling to the worst on record in the second quarter.
“The performance of the service sector in August was quite notable,” Yao Yu, founder of RatingDog Shenzhen Information Technology Co, said in a statement. “However, the persistent pressure on output prices, and thereby profits, suggests that the service sector recovery may be imbalanced.”
New business orders expanded at the fastest rate since May 2024, with companies attributing the improvement to increased tourism and better market conditions, according to the statement.
But output prices declined slightly after rising in July, even as input costs increased amid intense market competition. That shows companies weren’t able to pass on rising costs to customers, leading to more pressure on profit margins, the statement shows.
“Profit margins have been under continuous pressure since November 2023, with no significant relief to date,” Yao said.
Stronger services drove an improvement in the official measure of non-manufacturing activity in August, which rose to 50.3 from 50.1 in July. The official services PMI increased to the highest this year.
China’s economic momentum still appears weak, as a government crackdown on price wars weighs on production, while a worsening downturn in the housing market is exerting an additional drag on activity. Home sales extended their slump in August, making it one of the weakest months on record, even as prices declined.
The PMI readings indicate changes compared to the previous month reported by survey respondents.
Other highlights of the data:
- Service providers reported a fall in staffing levels in August, and headcount fell in two of the past three months
- Average input costs rose for the sixth straight month, due to higher wages and raw material costs
- Sentiment on firms’ one-year outlook remained positive, with the level of confidence unchanged from July
Source: theedgemalaysia