In October, China's immense service industries experienced notable expansion driven by new business and offshore demand, as reported by S&P Global. The seasonally adjusted Caixin China Services purchasing managers index (PMI) registered at 52.0 in October, significantly up from 50.3 in September, indicating robust growth above the critical 50 threshold separating growth from contraction.
This positive shift follows a sluggish third-quarter expansion of 4.6% year-over-year in China's gross domestic product (GDP), partly affected by a challenging property market. In response to these economic conditions, Beijing has recently introduced various fiscal stimulus measures, while the nation's central bank has implemented interest rate cuts. Unlike the manufacturing and real estate sectors, the service industries have demonstrated a consistent, albeit moderate, expansion since the beginning of 2023.
The October results indicated an extension of the expansion phase that began in January 2023. A rise in underlying demand and improved market conditions facilitated growth in new business inflows for service providers during the month, particularly through robust export orders. In order to satisfy the growing demand, service managers in China have increased their payrolls.
They reported that "as a result of rising workloads and improved confidence about future output, service providers in China continued to raise staffing levels in October." While there was a modest rise in input costs within the service sector, output prices remained stable throughout October. Service providers exhibited greater confidence regarding the 12-month outlook, reflecting improved sentiments compared to September.
"Anecdotal evidence suggested that firms were hopeful that a better economic climate and increased promotional efforts can help to support sales growth in the year ahead," as stated by S&P Global. The China services PMI was compiled through a survey conducted among 650 private and state-owned services companies between October 10 and October 23.
Additionally, the China composite PMI, which includes data from both manufacturing and service sectors, rose to 51.9 in October, an increase from 50.3 in September..