China’s services sector recovery gathers pace in September

Recent economic indicators also suggest a further pick-up in the industrial sector

epa07770729 People walk pass by a Swarovski store in a commercial district in Beijing, China, 13 August 2019. Fashion brands Versace and Coach apologize to Chinese customers after social media users called for a boycott of the brands due to separate T-shirts from both fashion houses that suggested Hong Kong and Taipei were separate from China. And also Swarovski apologizes to Chinese customers for erroneously describing Hong Kong as a country on its website.  EPA/WU HONG
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The recovery in China’s service sector activity extended into a fifth straight month in September, an industry survey showed on Friday, with hiring increasing for the second month in a row.

The Caixin/Markit services Purchasing Managers’ Index (PMI) rose to 54.8 from August’s 54.0, the highest reading since June and staying well above the 50-mark that separates monthly growth from contraction.

The services sector, which accounts for about 60 per cent of the economy and half of urban jobs, had initially been slower to return to growth than large manufacturers, but the recovery has gathered pace in recent months as Covid-19 restrictions on public gatherings lifted.

Firms hired more for the second month in a row, although at a still modest rate, indicating some recovery in a labour market that has been hit by sharp falls in demand and epidemic restrictions earlier in the year.

Domestic demand drove new orders, with the survey showing new export businesses received by Chinese services firms slipping further into contraction in September.

“The services sector’s post-epidemic recovery showed signs of speeding up,” said Wang Zhe, senior economist at Caixin Insight Group, in comments released alongside the survey.

Service firms remained optimistic about business prospects as the economy continues to recover from the Covid-19 lockdowns, with a sub-index for confidence in the year rising from August.

The official PMI also showed activity in China’s services sector expanded at a faster pace in September.

China estimated that 13 million railway passenger trips were made on October 1, the start of the Golden Week holiday, the highest for a single day since the coronavirus outbreak began in February, according to state media.

The services sector's post-epidemic recovery showed signs of speeding up

However, this figure is still well below the 17 million trips made the same day last year.

Recent economic indicators ranging from trade to producer prices have all suggested a further pick-up in the industrial sector, adding to the demand recovery from the coronavirus-induced slump.

Many analysts expect China to be the only major economy to mark positive annual growth in 2020, although at decades-low levels.