China's service sector experienced a modest expansion in February 2023, bolstered by slight increases in new business volumes, as reported by S&P Global. The Caixin/S&P Global China services purchasing managers index (PMI) recorded a seasonally adjusted value of 51.4 in February, an improvement from 51.0 in January and a reassuring rise above the 50 mark that distinguishes growth from contraction. This marks a remarkable 26 consecutive months where the services PMI index has remained above the neutral 50.0 threshold, indicating a sustained period of continuous growth in the sector.
Additionally, the expansion reflects positive trends in employment, albeit with modest payroll additions seen in February. Employment levels remained largely stable during the month. Although rising demand spurred hiring at some firms, many remained cautious in their staffing decisions. Despite facing ongoing international trade tensions, providers in China's service sector reported an uptick in offshore demand during February.
The external demand aspect improved significantly, with the gauge for new export orders reaching a three-month high while remaining firmly positioned in expansionary territory. In contrast to business leaders in other parts of the world, those managing sectors in China encountered mild deflation in February.
There was a fractional decline in input prices along with heightened market competition, which contributed to the first observed (albeit marginal) drop in output charges in three months. Service-sector confidence saw a moderate rise during February, with optimism peaking at its highest level since November of the previous year.
Business leaders expressed hope for stronger market demand and improved economic conditions going forward. The China services PMI is derived from surveys conducted by S&P Global with responses from 650 private and state-owned service companies between February 10 and February 20. Furthermore, the China composite PMI, which aggregates the manufacturing and service sectors, also improved, coming in at 51.5 in February, up from 51.1 in January.
This suggests that there were modest growth rates in production across both sectors, correlated with strengthened gains in new orders, as summarized by S&P Global..