By Gina Lee
Investing.com – China’s services activity saw its slowest pace of growth in five months in January, a private survey showed on Monday. Increasing numbers of local COVID-19 cases and the ensuing containment measures hit both new business and consumer sentiment, while employment also fell.
Data released earlier in the day showed that the Caixin services purchasing managers index was 51.4, the lowest since August 2021. The figure was lower than the 53.1 figure reported in December, but still above the 50-mark indicating growth.
The lower-than-expected growth could prompt the government to roll out more measures to support the economy. The People’s Bank of China has already started cutting interest rates and pumping more cash into the financial system, with more measures expected in the following weeks.
Slower growth was due to the COVID-19 outbreaks, according to some services providers, while the rising number of COVID-19 cases globally also slowed demand from overseas. This in turn led to a renewed fall in employment, marking the first decline in the data series since August 2021, according to the survey.
"In December and January, the resurgence of COVID-19 in several regions such as Xian and Beijing forced local governments to tighten epidemic control measures, which restricted production, transportation, and sales of goods," Caixin Insight Group senior economist Wang Zhe said in a statement accompanying the data release.
"This year, policymakers should make stability their focus. They should prioritize improvements to employment and optimize the structure of the economy."
Inflation also remains a concern for Chinese service firms, the survey also showed. Input costs rose at a sharper rate in January 2022, while prices charged climbed to a three-month high as some companies passed on higher costs to consumers.
Confidence for the year ahead remained high, although the uncertainty surrounding the COVID-19 pandemic meant that levels were at a 16-month low.