China’s Service Sector Shows Robust Growth in March

In March, China’s services sector experienced a notable acceleration in growth, with the Caixin/S&P Global services purchasing managers’ index (PMI) indicating an uptick to 52.7 from February’s 52.5. This rise, marking the sector’s 15th consecutive month of expansion, signifies a resurgence in business activity and sentiment within the world’s second-largest economy.

The increase in the services PMI is attributed to a surge in new business, the fastest in three months, bolstered by an uptick in underlying demand and strategic efforts to secure new orders. This growth in new business has also enhanced business confidence, with the future activity sub-index climbing for the first time in three months. Optimism is rooted in the anticipation of new product launches, expansion initiatives, and increased client budgets poised to drive sales further.

Despite these positive trends in sales and business confidence, the improved market conditions have not yet led to an increase in employment. For the second consecutive month, the employment levels have declined, albeit at a slower rate than in February, as companies face challenges with staff resignations and make redundancies to enhance productivity.

This service sector growth complements the positive findings from the Caixin manufacturing PMI, leading to a composite PMI rise to 52.7 in March. This is the highest since May 2023, reflecting slight accelerations in supply and demand across both manufacturing and services sectors, improved exports, and sustained market optimism.

However, challenges remain as both sectors witness continuing employment contraction and low input and output prices, suggesting that demand recovery is still in its early stages.