China services activity slows on rising inflation pressures

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China services activity slows on rising inflation pressures

BEIJING, December 3, Reuters- Activity in China's services sector increased at a slower pace in November due to rising inflationary pressures and continuing small-scale COVID 19 outbreaks, a private survey showed on Friday.

The PMI of Caixin Markit Services fell to 52.1 in November from 53.8 in October, but remained above the 50 point mark that separates growth from contraction on a monthly basis.

The readings in the private survey that focuses more on small firms in coastal regions, tallied with those of an official survey, showed that the expansion in the services sector lost some steam.

The services sector, which has been slower to recover from the pandemic than manufacturing, is more vulnerable to sporadic COVID 19 outbreaks and anti-virus measures, which has hampered the outlook for a much anticipated rebound in consumption in the months to come, according to analysts.

China's leisure and tourism businesses have been feeling the heat due to the country's zero tolerance COVID 19 strategy to contain infections. The country is currently battling a small-scale outbreak in Inner Mongolia.

Input prices of firms also increased for the 17th month in a row and at the fastest pace since May due to rising labour and raw material costs. The prices charged rose, but at a slower pace, pointing to margin pressures.

A sub-index for new business rose, but it was at the slowest pace since August. Business expectations improved from the month before.

The November composite PMI of Caixin, which includes both manufacturing and services activity, fell to 51.2 from 51.5 the previous month.

Policymakers should still focus on supporting small and midsize enterprises. Wang Zhe, senior economist at Caixin Insight Group, said they should pay attention to problems such as deteriorating job prospects, limited household income growth and weak consumer purchasing power.

Enterprises are facing high cost pressures.