BEIJING (Reuters)

China's services activity expansion slowed in September as new business growth hit its weakest in nearly a year, despite an increase in exports, according to a private-sector survey released on Monday.

The Caixin/S&P Global Services Purchasing Managers' Index (PMI) fell to 50.3 in September from 51.6 in August, marking the lowest reading since September 2023. The 50-mark distinguishes between expansion and contraction on a monthly basis.

New business saw a marginal increase, with the growth rate slowing to its lowest level in 11 months. Conversely, new business inflows from abroad accelerated at the fastest pace in three months.

Despite the increased new business, capacity pressures became apparent as backlogged work accumulated, leading to additional hiring. Employment rose following a decline in August.

Survey respondents noted that average input costs rose due to higher material, labor, and energy costs; however, firms hesitated to raise their prices despite mounting cost pressures.

Overall business confidence plummeted to its lowest level since March 2020, with some firms voicing concerns over heightened competition and the global economic outlook.

Together with the manufacturing PMI, the Caixin/S&P Global Composite PMI eased to 50.3 in September, down from August's 51.2.

Wang Zhe, an economist at Caixin Insight Group, stated, "Across the board, the latest macroeconomic data have fallen short of market expectations. Insufficient domestic demand remains a prominent issue, putting pressure on employment and weakening optimism."

Last week, China’s top leaders acknowledged that the economy faces "new problems" and called for fresh policies to stimulate growth more "forcefully." The meeting emphasized the need to address challenges in the struggling property market and implement necessary fiscal spending.

China's central bank also introduced its most significant monetary easing since the pandemic last week, with markets and economists anticipating further policy support soon.