China’s service sector witnessed a strong boost in demand during November, however, its expansion lowered the following month as the business confidence declined to be one of the second lowest on record. This occurred even though there was a pick-up in new orders.
Furthermore, service companies are being cautious regarding China’s economy outlook even though there has been cautious measures, improvement in manufacturing sectors, and the long anticipated U.S-China trade deal. More than half of the economy is dominated by the service sector.
The purchasing mangers’ index (PMI) of Caixin/Markit was 53.5 in November after an eight month low but in December it hit 52.5. The index has rested superior to the 50-point margin since late 2005, which differentiates contraction from growth on a monthly basis.
According to the National Bureau of Statistics, the official non-manufacturing PMI fell down after eight-month’s high that lasted till November.
Beijing has been expecting a strong boost in growth from the services sector as there is slowdown in investment and manufacturing industry. This uplift can help create jobs for workers that have been laid-off. Economic growth has been cooled down owing to sluggish demand from abroad and home.
Zhong Zhengsheng, CEBM Group’s macroeconomic analysis director wrote in a note during the Caixin PMI release that China’s economy is expected to start 2020 with a quick kick, however, it will still witness constrain during the rest of the year.
The survey has increased the concerns among the services companies over the economic conditions and lack of staff. Job creation pace has also been modest due to the employment sub-index hitting lowest level since July. Moreover, input costs are rising, leading companies to squeeze profit margins by lowering their selling prices for the first time in the year. This occurred even after rise in the volume of new work in December.