China March services activity speeds up as new business rises at quickest pace in 3 months

In a sign staging a tentative recovery in the world’s second-largest economy, China witnessed an acceleration in services activity growth in March this year with new business rising at the quickest pace in three months, as per a private-sector survey released on Wednesday.

Complementing the better-than-expected manufacturing surveys, this data also suggested that segments of China’s economy are gaining traction in the first quarter.

The Caixin/S&P Global services purchasing managers’ index (PMI) saw a slight uptick to 52.7 in March from 52.5 in February, maintaining its expansionary trend for the 15th consecutive month, surpassing the crucial 50-mark.

The acceleration in new business expansion attributed to improving underlying demand and initiatives to bolster new orders, marked the swiftest pace since December last year.

This uptrend also bolstered business confidence, with the sub-index of future activity registering an increase for the first time in three months. There’s optimism surrounding the potential impact of new product lines, expansion initiatives, and augmented client budgets on sales growth.

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However, better sales and business confidence failed to translate into higher recruitment. Employment levels shrank for a second successive month in March, though the rate of job shedding eased from February. According to respondents, resignations among staff and redundancies to improve productivity resulted in a fall in payroll numbers.

Taken together with the upbeat Caixin manufacturing PMI, the Caixin/S&P’s composite PMI rose to 52.7 last month from 52.5 in February. It marked the highest reading since May 2023.

“Growth in supply and demand in both the manufacturing and services sectors accelerated slightly, with improved exports and sustained market optimism,” said Wang Zhe, economist at Caixin Insight Group.

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But he noted employment in both sectors continued to contract, while input and output prices remained low, indicating that “sluggish demand persisted.”

With inputs from Reuters.