By Gina Lee
Investing.com – China’s services sector activity expanded at a faster pace in October as demand remained strong. However, rising inflation weighed on business confidence for the year ahead.
Data released earlier in the day showed that the Caixin services purchasing managers index (PMI) was 53.8, higher than the 53.4 recorded during the previous month. The index remained above the 50-mark indicating growth.
The data from the private survey, which focuses more on small firms in coastal regions, contrasted with the National Bureau of Statistic’s non-manufacturing PMI, which was a lower-than-expected 52.4. In the manufacturing sector, the Caixin manufacturing PMI was 50.6, and the manufacturing PMI was 49.2.
The services sector has made a slower recovery from COVID-19 than its manufacturing counterpart as it remains more vulnerable to virus outbreaks, with the associated mobility curbs clouding the outlook for a rebound in consumption in the months to come.
The “Zero Covid” strategy pursued by China has hit leisure and tourism businesses hard as the country deals with its latest COVID-19 outbreak. Cities with cases, or those with concerns about the virus’ spread, have closed entertainment venues, restricted tourism, and delayed cultural events.
Input prices also rose for the 16th month in a row, and at the fastest pace since July 2021, thanks to rising labor and raw material costs. However, solid demand allowed firms to pass some of the costs to consumers.
But persistent inflationary pressures and concerns about supply chains also drove business confidence to its lowest level in four months.
"Supply and demand recovery both retained momentum. Employment was more or less stable. Gauges for prices were high," Caixin Insight Group senior economist Wang Zhe told Reuters.
"Policymakers should not only take effective measures to stabilize commodity supplies and prices, but also pay close attention to downstream firms, especially small and midsize ones."