China Services Activity Surprisingly Picks up in Private Survey

Pedestrians in Pudong's Lujiazui Financial District in Shanghai, China, on Tuesday, Jan. 3, 2023. China's economy ended the year in a major slump as business and consumer spending plunged in December, with more disruption likely in the first few months of the year as Covid infections surge across the country. Photographer: Qilai Shen/Bloomberg

(Bloomberg) -- China's services activity expanded at a faster pace than expected in July, a private survey showed, a sign of resilience for one of the economy's main growth drivers this year.

The Caixin services purchasing managers' index rose to 54.1 last month, Caixin and S&P Global said in a statement Thursday. That exceeded economists' expectations and marked an acceleration from June's 53.9 reading. Any figure over 50 indicates expansion from the prior month.

The positive reading is a welcome sign for the services industry, which has held up during an otherwise troubled post-pandemic recovery for China. Consumers boosted spending in bars and restaurants by more than 20% in the first half of 2023 from the same time a year earlier.

“Both service supply and demand continued to expand in July,” said Wang Zhe, senior economist at Caixin Insight Group, in a statement accompanying the data.

The pickup was driven by a marked rise in overall new business, according to Caixin and S&P Global. This “encouraged firms to expand their payroll numbers for the sixth month in a row,” according to the statement.

The Caixin survey results were better than the official PMI reading for the services sector released earlier this week, which showed a waning to 51.5 last month from 52.8 in June.

Other sectors have struggled this year, weighing on the country's recovery as the property downturn deepened and exports have started to fall. Spending on goods, meanwhile, has moderated in recent months, posing threats for the consumption-driven rebound.

Authorities have announced a raft of marginal measures aimed at boosting consumption lately, but have refrained from providing direct fiscal help to consumers or introducing major stimulus.

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