According to a private sector survey released on Thursday, China’s services activity accelerated in March at its fastest rate in two and a half years as a result of strong job growth, new orders, and a consumption-driven post-COVID recovery.
As a result of the government lifting strict anti-virus restrictions in the latter part of last year, the Caixin/S&P Global services purchasing managers’ index (PMI) increased to 57.8 in March from 55.0 in February. This was the third consecutive monthly growth. Since November 2020, the reading was at its highest.
On a monthly basis, the 50-point threshold distinguishes between activity increase and decline.
The positive number was consistent with an official PMI that was released last week and rocketed to its highest level in almost a decade.
The rate of new orders increased at its fastest rate since November 2020 as a result of improvements in consumer demand, according to the Caixin poll. Notably, the services sector experienced the greatest growth in new export orders on record.
The rate of job creation was the highest in 28 months as businesses hired more employees to meet the escalating business demand.
However, the sector as a whole saw a three-month low in business confidence.
At the end of the first quarter, input prices increased as a result of rising labor and raw material expenses. Additionally, businesses added more incoming new work, which put pressure on their capacity with backlogs of work.
In southeast Xiamen, Fujian province, a man by the surname of Yang who operates a home stay business remarked, “Bookings have recovered 70-80% to pre-COVID level and are not as good as I had expected.”
Yang continued, “Neither the economy nor household consumption have fully recovered.”
Amid mounting geopolitical tensions and financial worries outside of China, some experts questioned if the impressive economic rebound could persist for very long.
According to recent data and citing sluggish auto sales, Julian Evans-Pritchard, head of China economics at Capital Economics, the consumer recovery may have lost some pace in March and remained uneven.
Evans-Pritchard noted that while customers were fast to return to the roads and public transportation, they were slower to increase discretionary expenditure on expensive things or long-distance trips.
The manufacturing and services component of Caixin/S&P’s composite PMI increased from 54.2 in February to 54.5 in March, the fastest increase since June.