China Services Activity Growth Softens In January

(RTTNews) - China's services activity continued to expand in January but the growth softened amid slowing new business growth and job shedding, survey results from S&P Global revealed on Wednesday. The Caixin services Purchasing Managers' Index posted 51.0 in January, down from 52.2 in December. The reading was forecast to edge up to 52.3.

The score has remained above 50.0 signalling expansion since January 2023. However, the pace of growth softened since December.

Higher new business underpinned by improvements in demand and successful business development efforts supported the increase in services activity. Nonetheless, foreign demand returned to growth after falling at the end of 2024.

The level of unfinished business declined for the first time since July 2024. Moreover, the rate of decline was the most pronounced in two-and-a-half years.

On the price front, the survey showed that cost pressures intensified in January. Cost inflation hit the highest in three months. Driven by rising input prices, service providers raised their selling prices for the second month in a row.

Sentiment in the service sector was positive and firms expressed hopes that business growth plans and supporting government policies can support sales in the next twelve months. Nonetheless, the level of confidence remained below-average.

As quicker manufacturing output growth failed to offset a softening of services activity expansion, the composite output index dropped to 51.1 in January from 51.4 in the prior month. Nonetheless, the private sector extended the period of continuous expansion to 15 months.

"The stimulus policies introduced since September 2024 have delivered tangible results, enabling China to achieve its economic growth target for the year," Wang Zhe, a senior economist at Caixin Insight Group said.

"However, the effectiveness of the measures — such as large-scale equipment upgrades and trade-in programs for consumer goods — may diminish in 2025," the economist added.