China Services Activity Gauge Signals Continued Growth, Optimism
The Caixin services purchasing managers index came in at 51.5 in November, edging down from 52.0 in October
A private gauge of China’s services activity suggests that the sector has continued to expand, with firms’ optimism at a seven-month high as Beijing’s policy support boosted market confidence.
The Caixin services purchasing managers index came in at 51.5 in November, edging down from 52.0 in October but continuing to signal growth for a 23rd consecutive month, said Caixin Media Co. and S&P Global on Wednesday.
The index has remained above the 50 mark that separates contraction from expansion since January 2023.
Both supply and demand in the sector continued to grow, but at a marginally slower pace, according to Caixin. Business activity and total new orders followed suit, while overseas demand growth decelerated for a second straight month, the data indicated.
Employment in the services sector grew for a third consecutive month in November, but was limited despite continued increases in total new orders.
As Beijing’s more aggressive stimulus efforts start to kick in, sentiment among service providers has improved markedly, with the gauge for future expectations rising for a second month.
“Service providers generally expressed confidence in market improvement amid policy support, although some were concerned about the future trade environment,” said Wang Zhe, senior economist at Caixin Insight Group.
Possible tariff hikes from the U.S. under a second Trump administration have worried corporate China, fueling hopes of more policy support from Beijing next year as domestic challenges including a protracted property-market slump continue to weigh on economic growth.
“The structural and cyclical pressures facing the economy are expected to continue, coupled with the likelihood of continued accumulation of external uncertainties, which requires sufficient policy buffers,” said Wang.
Wednesday’s readings are in line with the official gauge released previously. China’s official nonmanufacturing PMI, which covers both service and construction activity, fell to 50.0 in November from 50.2 in October. The subindex tracking service activity stayed unchanged at 50.1, suggesting continued expansion.
Both the official and Caixin PMI readings for the manufacturing sector came in stronger in November, pointing to a solid burst of activity, which may have been aided in part by the front-loading of shipments ahead of potential U.S. tariffs.
Overall, the surveys suggest that the Chinese economy continued to regain momentum in November, Capital Economics said in a note.
Its average of the official and Caixin composite PMIs touched a five-month high for November, consistent with its expectation for an acceleration in on-quarter gross domestic product growth this quarter, economist Gabriel Ng said.
However, the boost from policy support is likely to be short-lived, Ng said, expecting foreign protectionism and domestic structural problems to weigh on growth over the coming years.