Investing.com-- China’s service sector grew at a much slower-than-expected pace in October, a private survey showed on Friday, as a deepening slump in domestic demand largely offset some improvement in foreign orders.
The Caixin services purchasing managers index (PMI) grew 50.4 in October, missing estimates for a reading of 51.2. The reading accelerated slightly from the 50.2 seen in September, but still remained just shy of contraction. A reading below 50 indicates contraction in the sector.
The weak data for October was largely driven by a further softening in local demand, which saw new order growth slow substantially, turning companies more cautious over expanding their businesses.
While some improvement in foreign demand aided the services sector, it was largely insufficient in offsetting a decline in local demand. Chinese businesses and consumers have scaled back sharply on spending this year, amid increasing concerns over a slowdown in the world's second-largest economy.
The Caixin survey showed that businesses grew less optimistic about China’s economic prospects this year, especially as PMI data released earlier in the week showed an unexpected contraction in China’s manufacturing sector.
The soft PMI readings highlighted the sustained weakness in China’s economy this year, with economic activity struggling to pick up despite the lifting of anti-COVID measures at the beginning of the year.
While Beijing rolled out a string of stimulus measures in recent months to support growth, they appeared to have so far provided only a limited boost to the economy.
This was particularly apparent by weakness in the services sector, which is otherwise a stalwart supporter of business activity.
Still, China is set to issue about 1 trillion yuan ($136 billion) in government bonds this year to spur more infrastructure growth. This is expected to help shore up some economic activity in the coming months.
But while recent data showed that China’s economy grew more than expected in the third quarter, PMI readings released this week indicate a sluggish start to the fourth quarter.