Chinese service sector grows at slowest pace in 10 months in February – Caixin PMI

BEIJING, March 3 (Reuters) – China’s service sector activity grew at its slowest pace in 10 months in February as businesses struggled with sluggish demand and high costs, a survey showed on Wednesday the private sector, encouraging them to cut jobs.

The Caixin / Markit services purchasing managers index (PMI) fell to 51.5, the lowest since April, from 52.0 in January, but remained above the 50 mark that separates the growth of the contraction on a monthly basis.

An employment sub-index stood at 47.9, slipping into contraction after six months of growth as companies laid off workers, according to the survey. New export activity also declined after a three-month expansion.

The loss of momentum came as China faced coronavirus outbreaks earlier this year, as overseas demand continued to be affected by the COVID-19 pandemic. The results were largely in line with an official survey released on Sunday.

“The momentum for resuming post-epidemic services has weakened further,” said Wang Zhe, senior economist at Caixin Insight Group, in a statement accompanying the data release.

“Service providers have downsized their staff to cut costs, as weaker market confidence has had a knock-on effect on the labor market.”

The service sector, which had been slower to recover from the pandemic initially than the industrial sector, is more vulnerable to social distancing restrictions.

National cases of COVID-19 have, however, been eradicated in China since early February and analysts expect a strong rebound in full-year growth.

February also saw the Lunar New Year holiday, when many workers return to their hometowns, although this year has seen far less travel amid coronavirus fears.

Costs for service companies continued to grow rapidly, albeit at a slower pace than in the previous month.

But Chinese service companies remained bullish for the year ahead, with business expectations for the next 12 months rising from January.

Caixin’s composite manufacturing and services PMI, also released on Wednesday, slipped to 51.7 in February from 52.2 the previous month. (Reporting by Gabriel Crossley; Editing by Ana Nicolaci da Costa)