China’s services activity skids in October on COVID restrictions – Caixin PMI

BEIJING (Reuters) – China’s services activity contracted again in October as COVID-19 containment measures hit businesses and consumption, overshadowing the economic rebound in the last quarter, a private-sector business survey showed on Thursday.

The Caixin services purchasing managers’ index (PMI) fell to 48.4 last month, the lowest since May, from 49.3 in September as rising COVID caseloads led to worsened disruptions and weighed on consumer confidence. The 50-mark separates contraction from expansion on a monthly basis.

An official survey on Monday also showed services activity, which relies more on face-to-face interactions, fell into contraction territory in October from expansion in the month prior.

After better-than-expected growth in the third quarter, China’s economy is again struggling for traction amid persistent anti-virus measures, a protracted property sector crisis and mounting global recession risks.

Survey respondents said new business was down for second consecutive month in October despite the week-long National Day holiday earlier in the month.

Tourist trips fell 18.2% from last year’s holiday season with domestic tourism revenues down 26.2%.

Services including retail sales, accommodation and catering sectors are under pressure due to COVID outbreaks, a spokesperson for the commerce ministry said last week.

The gauge for new export orders also dropped into contraction territory from expansion the previous month.

Surprisingly, the survey showed that efforts to expand staffing capacity and enhance sales capabilities led to a rise in employment across the service sector. The sub-index of employment was the highest since May 2021 and ended a run of job losses stretching back to the start of 2022.

Surveyed firms also maintained a positive outlook for business activity over the next 12 months, shaking off a six-month low in September, but the degree was still significantly lower than the long-term average due to concerns over recurring COVID outbreaks and global recession risks.

“The negative impact of COVID controls on the economy lingered, and the economy was faced with increasing downward pressure,” said Wang Zhe, an economist at Caixin Insight Group.

China’s heavy-handed response to outbreaks is showing no signs of easing and is exacting a widening toll on the economy, with electric vehicle maker NIO suspending production at its plants in the eastern city of Hefei and Shanghai’s Disney Resort shutting down temporarily.

Caixin’s composite PMI, which includes both manufacturing and services activity, dropped to 48.3 in October from 48.5 the previous month, marking the lowest since May.

The Caixin PMI is compiled by S&P Global (NYSE:) from responses to questions sent to purchasing managers in China.

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