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China services activity shrank to six-month lows in November: Caixin PMI

BeijingEdited By: Anamica SinghUpdated: Dec 05, 2022, 11:42 AM IST
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Economists and analysts believe that Beijing might abandon its zero-Covid approach by the annual parliamentary meeting in spring next year. Photograph:(Reuters)

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Another larger official survey that came out on Wednesday had showed that services activity fell to seven-month lows.

A private-sector business survey has shown that China's services activity shrank to six-month lows in November. This happened amid widening Covid curbs that directly impacted demand and operations. China's economy has been hit extensively due to the pandemic and the zero-Covid policy and this reports adds to its agony.

The Caixin/S&P Global services purchasing managers' index (PMI) fell to 46.7 from 48.4, marking the third monthly contraction in a row. The 50-point index mark separates growth from contraction on a monthly basis.

Another larger official survey that came out on Wednesday had showed that services activity fell to seven-month lows.

China has been witnessing a record number of Covid cases for the past few weeks. Analysts at Nomura estimated that areas in lockdowns accounted for about a quarter of China's gross domestic product (GDP) by the end of the month. This meant a loss to domestic consumption and supply chains being disrupted.

"Since October, the impact of Covid outbreaks has taken a heavy toll on the economy, and the challenge of how to balance Covid controls and economic growth has once again become a core issue," Wang Zhe, senior economist at Caixin Insight Group, told Reuters.

"The market is in urgent need of policies to promote employment and stabilize domestic demand. Beijing should further coordinate fiscal and monetary policies to expand domestic demand and boost incomes of the poorer parts of the population," Wang added.

Companies in the Caixin/S&P survey reported the strongest falls in output and new work for six months. They have been laying off staff as confidence in the outlook for the next 12 months fell to an eight-month low. The rate of job losses was the quickest seen since the survey began in November 2005. 

However, relaxation of international travel rules enabled the export business to return to growth from contraction in October. Companies also continued to raise their prices, while input cost inflation softened.

Beijing has loosened certain virus policies on testing requirements and quarantine rules following widespread protests. 

Economists and analysts believe that Beijing might abandon its zero-Covid approach by the annual parliamentary meeting in spring next year.

Caixin/S&P's composite PMI, which includes both manufacturing and services activity, fell to 47.0 in November from 48.3 the previous month, driven by falls in both manufacturing and service sector output.

The Caixin PMI is compiled by S&P Global from responses to questions sent to purchasing managers in China.

(With inputs from agencies)

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