BEIJING (Reuters) – China’s service sector activity contracted at the second-fastest rate on record in April as tighter COVID restrictions brought the industry to a halt, leading to a sharper reduction in new businesses and employment, a private sector survey revealed on Thursday.
Caixin’s purchasing managers’ index (PMI) for services fell to 36.2 in April, the second lowest since the survey began in November 2005 and down from 42 in March. The index reached 26.5 in February 2020 at the start of the pandemic, representing the largest contraction in activity ever recorded.
The 50 point mark separates growth from contraction on a monthly basis.
The pessimistic results of the survey, which focuses more on small businesses in coastal regions, are in line with the government’s official PMI, pointing to the rapid deterioration of a sector which accounts for around 60% of the economy and half of jobs. urban.
A sub-index for new business came in at 38.4, also the second-lowest on record and down from 45.9 the previous month, as service firms signaled that escalating measures to contain the spread of COVID cases weighed heavily on customer demand early in the second quarter.
A China lockdown index compiled by Goldman Sachs rose more than 14 points on average in April from March, as Shanghai’s mall entered a citywide lockdown, with 25 million residents confined to their homes.
The private sector survey also showed that employment fell for the fourth consecutive month in April, although the decline was marginal, compared with significant declines in activity.
Meanwhile, input costs have risen at a healthy pace, but efforts by service companies to attract more business amid sluggish demand have led to lower prices charged, highlighting shrinking profit margins. faced by service providers.
“Demand was under pressure, external demand deteriorated, supply declined, supply chains were disrupted, delivery times lengthened, backlogs increased, workers struggled. struggling to get back to work, inflationary pressures persisted, and market confidence remained below the long-term average,” said Wang Zhe, senior economist at Caixin Insight Group.
As of Tuesday, 43 cities are under full or partial lockdown or have district-based controls in place, which entail strict mobility restrictions for local residents, according to Nomura.
The Politburo, a top decision-making body of the ruling Communist Party, said China would boost its political support, but analysts say their tasks and goals will become more difficult unless China eases its zero COVID policy, which which she showed few signs of doing.
Caixin’s April composite PMI, which includes both manufacturing and services, fell to 37.2 from 43.9 the previous month.
The Caixin PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in China.
(Reporting by Stella Qiu and Ryan Woo; Editing by Sam Holmes)
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