China's vast service industries experienced significant expansion in October, 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, an increase from 50.3 in September, indicating a continued growth trajectory above the critical 50-mark that separates expansion from contraction. Following a lackluster third-quarter GDP growth rate of 4.6% year-on-year, partly due to challenges in the property market, the Chinese government has recently introduced a series of fiscal stimulus measures.
Simultaneously, the nation's central bank has implemented interest rate cuts to bolster economic activity. Contrary to the struggles faced by the manufacturing and real estate sectors, the service industries have sustained a steady, albeit moderate, growth since the beginning of 2023. The October results have further extended this growth period, which commenced in January 2023. A positive shift in underlying demand and market conditions has propelled growth in new business for service providers in October, along with a notable increase in export orders.
In response to rising demand, service managers in China have expanded their workforce. This increase in staffing is attributed to heightened workloads and improved confidence regarding future output. While there was a modest rise in input costs for service sectors in October, output prices remained stable.
Service providers exhibited improved confidence about their 12-month outlook in October compared to September. Anecdotal evidence suggested optimism among firms that a more favorable economic environment and enhanced promotional activities could foster sales growth in the upcoming year. The China services PMI was derived from survey responses collected from 650 private and state-owned services companies between October 10 and October 23.
Additionally, the composite PMI of China, which combines data from both the manufacturing and services sectors, increased to 51.9 in October, marking a rise from 50.3 in September..