Economy News

China: Growth in services decelerates in June

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The growth of activity in services in China was at its lowest for 14 months in June, weighted in particular by an outbreak of Covid-19 in the south of the country, according to an independent index published on Thursday.

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Beijing, China. The reduction in travel in China has also contributed to a slowdown in activity, resulting in a reduced workload for companies.

The purchasing managers activity index (PMI), calculated by the firm IHS Markit and published by the media group Caixin, stood at 50.3 points last month, against 55.1 in May. A number greater than 50 indicates an expansion of activity and, below, it indicates a contraction.

The deceleration in June is a surprise: the PMI index had not reached such a low level since April 2020. And analysts polled by the Bloomberg agency were expecting a stabilization (55.1).

While supply and demand in the sector continued to grow over the past month, business activity and new orders grew at the slowest pace in 14 months.

“The recent resurgence of cases of Covid-19 in the Pearl River Delta” in the province of Guangdong (south), the most populous in China, “has had some impact,” notes Caixin – although only one hundreds of local contaminations had been identified.

Optimism about the pandemic
The reduction in the number of trips also helped to dampen activity, resulting in a decrease in the workload for companies. Consequence: recruitments in the sector fell for the first time in four months – marginally, however.

At the price level, operating expenses increased only slightly in June, while selling prices fell for the first time since July 2020.

Despite the backlash from last month, “many companies remain convinced that the pandemic will be brought under control and that market conditions and global demand will recover further in the coming year,” notes Caixin. The Caixin-Markit survey, which mainly surveys SMEs, is reputed to provide an accurate picture of the economic situation.

For its part, the composite PMI index of Markit-Caixin, which aggregates services and manufacturing industry, fell to 50.6 points in June against 53.8 points the previous month. “The manufacturing industry returned to normal after the end of the epidemic (in China), while the service sector remains sensitive to regional resurgences” of Covid-19, underlines Caixin.

For MetaNews.

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Jonathan Hobbs is an Australian investor and author that trades on a variety of asset classes, including currencies, equities, and commodities. Jonathan’s experience as a macro trader leverages his unique writing style to combine important elements, such as technical analysis and news. The other elements that he brings into his unique writing styles are foundation analysis aimed at rational equilibrium values, evaluating the sizes and motivations of buyers and sellers, as well as identifying the needs of the buyers and sellers in the individual markets. Jonathan is committed to quality writing for new traders as well as veterans.

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