China’s services activity picks up slightly in October, but sales soften and employment stagnates

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 per cent of jobs in China, enjoyed a strong rebound earlier this year, but analysts said the sluggish household income growth and uncertain job market raise questions over the sustainability of the industry’s growth.

The 50-point mark separates expansion from contraction in activity.

“The services sector, which is highly related to youth employment, recovered 90 per cent 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.

However, there was further improvement in foreign demand for Chinese services amid reports of increased amounts of overseas visitors.

‘Bumpy road’ ahead for China’s economy as manufacturing takes surprise dip

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.