China’s Services Sector Expands at Fastest Pace in Four Months During April
The services sector across China registered the fastest growth seen since four months during April, supported by the emergence of new businesses in the space. The Caixin/Markit services PMI surged to 56.3 in April from 54.3 in March, touching the highest level since December 2020.
Unlike the official services PMI reading which revealed a slowdown in the pace of expansion within the sector, China’s private sector services firms experienced a faster pace of growth after the government eased restrictions and demand grew, especially from overseas. Total new orders received by the sector increased at the fastest rate seen since November 2020, which drove a hike in hiring activity for the second consecutive month.
However, the sector faces challenges from rising input costs, which posted a faster rate of increase during April driven by higher costs for raw materials and labor. Although companies increased their selling prices for the ninth consecutive month during April, the price rise did not match the increase in input costs, putting a strain on companies’ revenues.
Senior economist at Caixin, Wang Zhe, notes, “Inflation will be a focus in the future. Inflationary pressure was evident as input costs and output prices in manufacturing and services have continued to increase for several months. In the coming months, rising raw material prices and imported inflation are expected to limit policy choices and become a major obstacle to the sustained economic recovery.”
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