According to the report from Caixin/S&P Global, business activity growth in China's services sector slowed again in February, reaching its lowest level since November 2023 amid a subdued increase in overall new work. Meanwhile, business confidence fell to a 4-month low, with some companies becoming more cautious about forecasts due to relatively weak market conditions and expectations that customer spending may remain subdued.
The service PMI fell to 52.5 in February from 52.7 in January. Economists had expected an increase to 52.9. However, the index remains above the 50 point mark, which indicates an expansion of activity in the sector, for the 14th month in a row.
New order growth was little changed from January and remained slower than the average seen over 2023 as a whole. However, services companies registered a solid and accelerated increase in new work from overseas. The latest increase was the strongest since June 2023. The data also showed that outstanding business fell for the first time since July 2022 and payroll numbers dropped in February.
The Chinese economy has struggled to make a sustained recovery from COVID amid the crisis in the real estate sector, and as consumers rein in spending, manufacturers struggle for buyers, and local governments face huge debt burdens. Today, the media reported that China aims to achieve an economic growth of about 5% this year, which was unchanged from the 2023 target. Meanwhile, the budget deficit in 2024 is projected at 3% of GDP.