China's Services Activity Shows Strong Growth in October

BEIJING (Reuters) – China's services activity expanded at the fastest pace in three months in October, aided by early signs that Beijing's significant stimulus measures were improving business conditions, according to a private-sector survey released on Tuesday.

The Caixin/S&P Global services purchasing managers' index (PMI) rose to 52.0 in October from 50.3 in September. The 50-mark distinguishes between expansion and contraction.

This improvement matched the official PMI released last week, indicating that non-manufacturing activity, including services and construction, returned to expansion.

China's economy grew at its slowest rate since early 2023 in the third quarter, with little recovery in the struggling property sector, even as Beijing aims to meet its growth targets this year.

In September, Beijing implemented monetary stimulus and support measures for the property sector. Following this, a meeting of the Politburo emphasized the need for “necessary spending” to restore growth.

The survey indicated a slight increase in new business, up to 52.1 from 51.0 in September. However, growth in new business from abroad declined.

Service providers faced capacity pressures as new business contributed to a backlog of work, prompting a second consecutive month of employment increases.

Input price growth declined to a three-month low, although firms continued to encounter rising costs for materials and energy.

Overall confidence increased to its highest level in five months, with some companies enhancing promotional efforts to boost future sales growth.

When combined with the manufacturing PMI, the Caixin/S&P Global Composite PMI increased to 51.9 from 50.3 in September.

However, recent data reflect heightened deflationary pressures, weaker export growth, and subdued loan demand, raising concerns over economic recovery.

"Achieving China's 2024 growth target will depend on a sustained recovery in consumer demand. This necessitates policy efforts aimed at increasing household disposable income," said Wang Zhe, Senior Economist at Caixin Insight Group.