China's services sector grows faster than expected in October

China's services sector grows faster than expected in October

The private survey showed on Wednesday that activity in China's services sector increased faster pace in October, but growth in demand weighed on business confidence for the year ahead, although rising inflationary pressures weighed on business confidence.

In October, the Caixin Markit services Purchasing Managers' Index PMI rose to 53.8, the highest since July, from 53.4 in September. The 50 point mark separates growth from contraction on a monthly basis.

The improved readings in the private survey that focuses more on small firms in coastal regions stood in contrast to the official survey that showed the expansion in the services sector lost some steam.

Analysts say the sector of services, which has been slower to recover from the epidemic than manufacturing, is more unaffected by sporadic COVID-19 outbreaks in the country, clouding the outlook for the much anticipated rebound in consumption in the months to come.

China's leisure and tourism businesses have been чувствing the heat from the country's zero tolerance COVID-19 strategy to contain infections since late October. Cities with cases or those with concerns about the virus have closed entertainment venues, restricted tourism or delayed cultural events.

A sub-index for new business edged up to 54.1 from 53.1 in September, which was boosted by rising export orders that contracted the month before.

The price of Input went up for the 16th month in a row and was the fastest in a row since July due to rising labour and raw material costs. The prices were rising as firms could pass some costs to consumers, leading to an uptick in prices that charged to the highest in three months.

The survey showed that business confidence was the lowest in four months due to persistent inflationary pressures and concerns about supply chains.

Caixin's October composite PMI, which includes manufacturing and services activity, edged up to 51.5 from 51.4 the previous month. The demand recovery and the supply recovery are having a lot of momentum. The employment was more or less stable. Wang Zhe, a senior economist at Caixin Insight Group, said that gauges for prices were high.

The policymakers should not only take effective measures to stabilize commodity supplies and prices, but also pay close attention to downstream firms, especially small and midsize ones.