China's services sector activity grew at its slowest pace in nine months in January, a private sector survey showed on Wednesday, as a flare-up in coronavirus outbreaks weighed on businesses in the world's second-largest economy. The Caixin/Markit services Purchasing Managers' Index (PMI) dropped sharply to 52.0, the lowest since April, from 56.3 in December, while remaining above the 50-mark that separates growth from contraction on a monthly basis.
A sub-index for employment stood at 50.7, its lowest since July last year, and down from 52.0 the previous month, the survey showed. Growth in new export business, which only returned to expansion in November, slowed from the month before. The loss of momentum was largely in line with the findings in an official survey released on Sunday. The Caixin survey also showed a further acceleration in input prices, but the rise in prices charged by service firms slowed.
The services sector, which had been slower to recover initially from the COVID-19 pandemic than the industrial sector, is more vulnerable to social distancing restrictions as authorities race to tackle new scattered cases. "The services sector's post-epidemic recovery continued, but at a much slower pace," said Wang Zhe, senior economist at Caixin Insight Group, in a statement accompanying the data release.
"Some surveyed enterprises said the services market continued to recover, while many said the market had been hurt by the resurgence of the Covid-19 pandemic." Authorities imposed a series of local lockdowns in January to contain small-scale outbreaks in northern China in the country's worst coronavirus wave since March 2020.
But official data shows the number of new cases has dropped significantly in recent days, suggesting authorities are managing to contain the outbreak before the Lunar New Year holidays, which start on Feb. 11. Chinese services firms remained optimistic about the year ahead but business expectations over the next 12 months fell to the lowest levels in four months.
Caixin's composite manufacturing and services PMI, also released on Wednesday, slipped to 52.2 in January, from 55.8 the previous month.