BEIJING (Reuters) – China’s services activity expanded at a slightly faster pace in October, a private-sector survey showed on Friday, with sales growing at the softest rate in 10 months and employment stagnating as business confidence waned.
The vast services sector, which provides about 48% of jobs in China, enjoyed a strong rebound earlier this year but analysts say the sluggish household income growth and uncertain job market raise questions over the sustainability of the industry’s growth.
The Caixin/S&P Global services purchasing managers’ index (PMI) rose to 50.4 in October from September’s nine-month low of 50.2. The pace of expansion also remained much slower than seen on average in the first half of the year.
The 50-point mark separates expansion from contraction in activity.
An official survey showed on Tuesday that services PMI dropped to 50.1 from 50.9 in September.
“The services sector, which is highly related to youth employment, recovered 90% to pre-COVID levels,” said Xing Zhaopeng, senior China strategist at ANZ.
However, “it is unlikely to see a rebound beyond expectation in the sector,” he added.
New orders in the services sector last month rose at the weakest pace in 10 months, the Caixin survey showed, offsetting the bump higher from a travel boom seen during the eight-day National Day holiday.
However, there was further improvement in foreign demand for Chinese services amid reports of increased amounts of overseas visitors.
The slowdown in sales growth led to companies’ more cautious approach to recruitment. Employment in the sector was unchanged in October, having expanded in each of the previous eight months.
Amid subdued demand, overall optimism slipped for the fourth month in a row and was the lowest since March 2020.
Prices charged by services companies grew at a faster pace as they sought to pass on higher input costs to customers, though the rate of input inflation was the slowest since June 2022.
Caixin/S&P’s composite PMI, which includes both manufacturing and services activity, declined to 50.0 from 50.9 in September, marking the lowest reading since December 2022.
“The market conditions for manufacturing were more sluggish compared with the services sector,” said Wang Zhe, economist at Caixin Insight Group.
China’s economy staged better-than-expected growth in the third quarter, but economists say the weak property sector, fading demand for travel, local government debt and geopolitical tensions may weigh on the outlook.
(Reporting by Ellen Zhang and Ryan Woo. Editing by Sam Holmes)