China's assistance move eases as recovery sputters, private survey offers

July 6, 2023: On Wednesday, China’s assistance movement grew at the slowest pace in five months in June, a private-sector survey showed, as weakening demand weighed on post-pandemic healing momentum.

The Caixin/S&P Global services buying managers’ index (PMI) eased to 53.9 in June from 57.1 in May, the lowest reading since January when Covid-19 swept through the country after authorities ditched anti-virus curbs. The 50-point pattern divides growth from contraction in movement.

The data broadly tracked the country’s official PMI released last week and showed a slowdown in favor sector activity as demand for in-person services weakened.

After rising at a faster-than-anticipates rate in the first quarter, the world’s second-biggest economy lost moisture in April-June amid steepening deflation, high youth unemployment, and sluggish foreign demand.

The Caixin PMI indicated that business activity and new orders expanded at notably slower rates last month than in May. New export business growth also slowed but maintained a brisk pace.

Services companies signaled a solid rise in input costs at the end of the second quarter, with the rate of inflation little changed from May, while prices charged by service providers increased marginally in June.

Surprisingly, firms’ optimism towards the 12-month outlook strengthened, with companies hoping more muscular economic conditions and significant amounts of new work to support growth.

The rate of job creation in the services sector also increased to a three-month high but stayed mild overall. About half of employed Chinese work in the sector.

Caixin/S&P’s combined PMI, which includes manufacturing and services activity, decreased to 52.5 from 55.6 in May, approximately the sixth consecutive month of expansion.

“Employment contracted, deflationary pressure mounted, and optimism waned in the manufacturing sector,” said Wang Zhe, senior economist at Caixin Insight Group. “Therefore, the services sector continued a post-COVID rebound, but the recovery was losing steam.”

On Monday, Nomura chief China economist Ting Lu said in a note that there is additionally proof of an economic double-dip as the year’s second half begins.

China removes its second-quarter GDP data and June activity indicators in mid-July.