Coronavirus | China's services sector grows in July

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The growth in China's services sector accelerated in July, an economist showed on Wednesday, although the spread of the COVID - 19 delta variant across the country threatens to undercut the recovery in the second-largest economy.

The Caixin Markit Services Purchasing Managers' Index increased to 54.9 in July, the highest since May and up from 50.3 in the previous month. The 50-point mark separates growth from contraction on a monthly basis.

The better readings in the official survey, which focuses more on smaller firms in coastal regions, stood in contrast to findings in the private survey on Saturday showing growth in the services sector retreat slightly in July.

China's services sector has been slower to recover from pandemic than manufacturing, but has been helped in recent months by a gradual improvement in consumption. A rise in domestic coronavirus infections, however, is threatening to hurt the economy's constant recovery.

The July readings were enhanced by the successful containment of COVID - 19 cases in southern China, said Wang Zhe, senior economic analyst at Caixin Insight Group, although he warned that the impact from the latest round of outbreaks since late July was likely to hurt August PMI readings.

The economy still faces enormous downward pressure and we need to ensure business owners remain confident, Wang said.

Since the eastern city of Nanjing confirmed its first Delta cases on July 20, numerous cities in southern China and a few in the north including Beijing, have reported infections. The count of locally transmitted cases stood at 414 as of Monday.

Tourism is already taking a hit, as local authorities encourage people to stay put to avoid infection, which will be a blow to industries looking forward to peak summer travel demand.

A sub-index of new business in Caixin survey stood at 54.5 in July, up from 50.5 the previous month. New export orders contracted again due to the resurgence of COVID - 19 cases overseas.

Business confidence picked up, although it was still slightly lower than its long term average. Service sector employment returned to growth in July, but the rate of job creation was only weak as firms looked to control costs.

Caixin's July composite PMI, which includes both manufacturing and services activity, rose to 53.1 from June's 50.6.