Despite rising costs, China’s services sector continues to experience growth in new orders and business sentiment, indicating a possible sustained economic recovery. The Caixin/S&P Global services purchasing managers’ index (PMI) decreased slightly from 52.7 in March to 52.5, but remained in expansionary territory for the 16th consecutive month, with a composite PMI that tracks both services and manufacturing sectors increasing to 52.8 in the last month from 52.7 in March.
The growth in new export orders has been driven by better overseas demand and tourism activity, hitting its highest point since May of the previous year. This has boosted business confidence among Chinese service providers, reaching its highest level of the year. However, companies have faced cost pressures due to rising input prices for materials, labor, and energy, leading them to increase prices charged to their customers but still reluctant to fill vacancies created by departures.
The senior economist at Caixin Insight Group emphasized the importance of implementing earlier policies effectively and promptly to maintain economic recovery momentum and improve market expectations. While pockets of strength have raised hopes for a steady recovery throughout the year, economists believe that a robust revival is still a ways off and that structural reform efforts must be accompanied by greater stimulus measures to foster a stronger and more sustainable economic recovery.
