China May service activity contracts for third straight month

BEIJING, June 6 (Reuters) – China’s services activity contracted for a third straight month in May, pointing to a slow recovery despite the easing of some COVID lockdowns in Shanghai and neighboring cities, A private business survey showed Monday.

The Caixin Services Purchasing Managers’ Index (PMI) rose to 41.4 in May, up slightly from 36.2 in April, as authorities began to roll back some of the toughest restrictions that have paralyzed the financial city of Shanghai and the global economy. Supply chains were halted.

However, the readings remained well below the 50-point mark, which separates growth from contraction on a monthly basis.

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Analysts say weakness in the services sector, which accounts for nearly 60% of China’s economy and half of urban jobs, is likely to persist under the government’s zero-COVID policy, which will be borne by hotels and restaurants. contact-intensive areas. Conflict.

An official survey on Tuesday also revealed that the services sector was still in contraction.

The Caixin survey showed new business, including new export orders, fell for a fourth straight month in May as restrictions on mobility kept customers at home and disrupted operations.

This prompted service firms to reduce their payrolls at a faster rate, with the sub-index for employment at 48.5, the lowest since February last year and down from 49.3 the previous month.

Staff members are seen in silhouette at a restaurant after dine-in services were banned amid the coronavirus disease (COVID-19) outbreak, in the Central Business District (CBD) in Beijing, China June 2, 2022. REUTERS/Tingshu Wang

Official data showed China’s nationwide survey-based unemployment rate rose to 6.1% in April, the highest since February 2020 and well above the government’s 2022 target of below 5.5%.

“Employment measures have remained in the contraction zone since the beginning of this year. The impact of the pandemic has hit the labor market. Enterprises were not much motivated to increase hiring. As a result, the backlog in the services sector has been outstanding business backlog” Caixin Insight The group’s senior economist, Wang Zhe said, went further.

China’s economic activity cooled sharply in April as the country grapples with the worst COVID-19 outbreak since 2020.

To stabilize the situation in a politically sensitive year, China’s cabinet recently announced a package of 33 measures covering fiscal, fiscal, investment and industrial policies, although analysts say about 5.5% The official GDP target will be difficult to achieve without easing the zero- COVID strategy.

Wang of Caixin Insight Group said, “It is important for policymakers to focus on employment and logistics. Removing bottlenecks in supply and industrial chains and promoting the resumption of work and production can help stabilize market entities and It will help protect the labor market.” They should also give subsidy to those whose income has been affected by COVID.

Caixin’s May composite PMI, which includes both manufacturing and services activity, rose to 42.2 from 37.2 in the previous month. Factory activity eased less sharply in May, but still posted the second biggest decline since February 2020, showing that the recovery remains fragile.

The Caixin PMI is compiled from responses to a questionnaire sent by S&P Global to purchasing managers in China.

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Reporting by Stella Qiu and Ryan Wu; Editing by Kim Coghill

Our Standards: Thomson Reuters Trust Principals.

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