By Gina Lee
Investing.com – China’s services sector saw a sixth consecutive month of growth in October, with hiring seeing its highest level in a year but overseas demand dropping.
The Caixin Services Purchasing Managers Index (PMI) grew to 56.8 in October, higher than the previous month’s 54.8 reading and above the 50-mark separating growth from contraction. The Caixin manufacturing PMI for October, released earlier in the week, rose to 53.6. The manufacturing and non-manufacturing PMIs, released on Saturday, rose to 51.4 and 56.2 respectively.
Accounting for around 60% of the world’s second largest economy and half of urban jobs, the services sector had trailed behind the manufacturing sector in recovering from the impact of the nationwide COVID-19 lockdowns imposed earlier in the year. Although domestic demand boosted the service sector recovery, which has quickened in the past months, new export business received by Chinese services firms slipped further into contraction in October, the fastest rate since July.
European countries, such as France, Germany and the U.K. have recently re-imposed lockdowns to curb a second wave of COVID-19 cases in Europe and the U.S.
"The second wave of COVID-19 infections in Europe and the third wave in the U.S. have significantly suppressed China's overseas demand," Caixin Insight Group senior economist Wang Zhe said in comments released alongside the survey.
However, hiring by Chinese firms rose for the third consecutive month and at the fastest pace since September 2019, hinting at the labor market’s continuing recovery from the COVID-19 impact.
Although the sector’s rebound was boosted by recovering pent-up demand, stimulus-driven infrastructure expansion and buoyant exports, there were warnings of a dimming global outlook as the fight against COVID-19 continues.
"In the coming months, a continued recovery of the Chinese economy is highly likely, but it is necessary to be cautious about the normalization of monetary and fiscal policies in the post-epidemic period," Wang added.
China reported a weaker-than-expected GDP of 4.9% in the third quarter year-on-year in October, and GDP for the full year is projected to grow around 2%, the weakest in three decades.