Chinese service sector activity growth slows in April - Caixin PMI

Investing.com -- Chinese service sector activity grew at a slower-than-expected pace in April, a private survey showed on Friday, indicating that a post-COVID economic rebound in the country appeared to be cooling after an initial spike.

The Caixin Services Purchasing Managers’ Index (PMI) read 56.4 in April, lower than expectations of 57.3 and the prior month’s reading of 57.8, Caixin Insight said in a note.

But the index still hovered near three-year highs, as the sector was underpinned by pent-up consumer demand after the country relaxed COVID restrictions earlier this year. The reading also came in line with a government survey released earlier this week, which showed that non-manufacturing activity remained robust despite some cooling in April.

Services input cost inflation surged to a one-year high, the Caixin data showed, which could herald a broader increase in Chinese inflation over the coming months. Chinese consumer inflation has failed to pick up despite easy monetary conditions, while factory gate inflation has trended lower this year amid soft manufacturing conditions.

The Caixin data further highlights a growing rift in the Chinese economy, with growth in the service sector largely outpacing manufacturing. While the trend did indicate that local consumption was improving, an unexpected decline in manufacturing activity showed that China’s biggest economic engine still remained weak.

A recent decline in the manufacturing sector sparked renewed concerns over just how sustainable a post-COVID rebound could be.

Chinese businesses still remained optimistic over a recovery in conditions this year, the Caixin data showed. But they appeared to be slightly tapering their expectations for an economic rebound.

Service sector activity is still expected to remain buoyant in the coming months, especially as the Golden Week holiday in May saw a sharp rebound in travel demand and consumer spending.

China’s economy grew a bigger-than-expected 4.5% in the first quarter of 2023. But the government has so far provided a conservative forecast for annual growth, at 5%.