China services activity suffers second-biggest drop on record
Activity in China’s services sector suffered its second-largest drop on record in April amid tightening Covid restrictions, according to figures released on Thursday.
The Caixin services purchasing managers’ index fell to 36.2 from 42.0 in March, undershooting consensus expectations for a reading of 40.0. This marked the steepest contraction since February 2020, when the index slumped to 26.5.
A reading below 50.0 signals contraction, while a reading above indicates expansion.
Pantheon Macroeconomics said: "A decent drop was on the cards, given the tightening of zero-Covid restrictions, and the 6.7 point drop in the equivalent official PMI. But the Caixin survey had already fallen further and faster, generating expectations that the pace of decline would be more moderate in April. No such luck.
"Alongside the drop in service sector activity, which constitutes the headline reading, there was an even sharper drop in new orders, to 38.4, from 45.9, with new export orders also falling considerably.
"In fact, every single sub-index fell in April, including prices. Output prices, at 48.5, from 50.8, recorded their first sub-50 reading- indicating falling prices - since August. Employment, meanwhile, shrank for the fourth consecutive month, implying government support for firms is having limited effect."