According to Caixin, China’s services sector activity fell at the steepest pace in two years in March.

The Caixin Services Purchasing Managers’ Index (Services PMI) released on April 6 recorded 42.0 in March, a sharp drop of 8.2 percentage points from February and the lowest since the first COVID-19 pandemic started in Feb 2020.

The 50-point mark PMI separates growth from contraction on a monthly basis.

Meanwhile, the Caixin Manufacturing Purchasing Managers Index (Manufacturing PMI) released last week was 48.1, also falling into contraction territory.

Both sectors’ prosperity fell, dragging the Caixin Composite PMI down 6.2 percentage points to 43.9 in March, the lowest since March 2020.
Reuters reported that sectors such as hotel, catering, and transportation were hit the most, decreasing the expectation for a much-anticipated recovery in expenditure this year.

A sub-index for new business continued to decline for a second consecutive month and at the quickest rate since March 2020.
Caixin’s survey showed that the service industry supply and demand contracted severely.

The services business activity index fell sharply in March, below the critical point for the first time in nearly seven months. The services new orders index continued to fall in the contraction range, the lowest since April 2020.

In addition, the virus outbreaks and weaker consumer demand have caused employment to maintain a downward trend. The employment index in March was below the line of growth and declined for three consecutive months but slightly recovered from the previous two months.

Input prices rose again in March from a six-month low in February. Companies have reported increases in raw materials, food, transportation, labor, and COVID-19 epidemic prevention costs.

While Chinese services companies generally remained positive about output over the next year, the degree of optimism slipped to its lowest in 19 months due to concerns over the COVID-19 pandemic and the Russia-Ukraine war.

According to Reuters, Wang Zhe, Senior Economist at Caixin Insight Group, said in a statement accompanying the data release, “Overall, both manufacturing and services activities weakened in March due to the epidemic. Similar to previous COVID outbreaks in China, the services sector was more significantly affected than manufacturing.”

He added, “Policymakers should look out for vulnerable groups and enhance support for key industries and small and micro businesses to stabilize market expectations.”

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