BEIJING (Reuters) – China’s service activity contracted for a third consecutive month in May, pointing to a slow recovery ahead despite the easing of some COVID lockdowns in Shanghai and neighboring cities, an expert revealed on Monday. survey of private companies.
The Caixin Services Purchasing Managers’ Index (PMI) rose to 41.4 in May from 36.2 in April, up slightly as authorities began rolling back some of the tough restrictions that have crippled the financial city Shanghai and disrupted global supply chains.
However, the reading remained well below the 50 point mark that separates growth from contraction on a monthly basis.
Analysts say weakness in the service sector, which accounts for around 60% of China’s economy and half of urban jobs, is expected to persist under the government’s zero COVID policy, contact-intensive sectors such as hotels and restaurants bearing the brunt of the Fall.
An official survey on Tuesday also showed the services sector was still mired in contraction.
The Caixin survey showed new business, including new export orders, fell for the fourth straight month in May as mobility restrictions kept customers at home and disrupted operations.
This has led service companies to cut their payrolls at a faster pace, with the employment sub-index standing at 48.5, the lowest since February last year and down from to 49.3 the previous month.
Official data showed China’s national survey-based unemployment rate jumped to 6.1% in April, the highest since February 2020 and well above the government’s 2022 target of less than 5, 5%.
“The employment measure has remained in contraction territory since the start of this year. The impact of the epidemic has hit the labor market. Companies were not very motivated to increase hiring. continued to grow,” said Wang Zhe, senior economist at Caixin Insight Group.
China’s economic activity cooled sharply in April as the country grappled with the worst COVID-19 outbreak since 2020.
To stabilize the situation in a politically sensitive year, the Chinese cabinet recently announced a package of 33 measures covering fiscal, financial, investment and industrial policies, although analysts say the official GDP target of around 5 .5% will be difficult to achieve without relaxing the zero-COVID strategy.
“Policy makers need to pay more attention to employment and logistics. Removing barriers in supply and industrial chains and promoting the resumption of work and production will help stabilize market entities and protect the labor market,” said Wang of Caixin Insight Group, adding that they should also distribute grants to people whose income has been affected by COVID.
Caixin’s May composite PMI, which includes both manufacturing and services, rose to 42.2 from 37.2 the previous month. Factory activity fell less sharply in May but still recorded the second largest decline since February 2020, suggesting that a recovery remains fragile.
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 Kim Coghill)
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