Expansion in China’s services industry slowed in June from the previous month, according to a private survey, providing more evidence that the key driver of the country’s post-Covid recovery is cooling.
The Caixin China services purchasing managers’ index declined to 53.9 from 57.1 in May, Caixin and S&P Global said in a statement Wednesday, the weakest since January and much weaker than economists’ median forecast of 56.2. Any reading over 50 indicates an expansion from the prior month, while a number below that suggests contraction.
The drop indicates the stronger leg in China’s K-shaped economic recovery this year is losing momentum as consumers scale back spending on services such as travel and restaurants amid elevated youth unemployment rate and a gloomy income outlook. The data will likely raise pressure on the government to ramp up measures to support growth.
Gauges for mainland China and Hong Kong stocks extended losses after the data was released, with the Hang Seng China Enterprises Index sliding as much as 1.4%. The offshore yuan erased morning gains to decline 0.15% at 7.2384 per dollar as of 9:59 a.m. local time.
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Domestic travel spending during the recent holiday for the dragon-boat festival was lower than pre-pandemic levels. Home sales figures are below the level in previous years, while estimates for June car sales showed a drop from a year ago.
The Caixin survey focuses on smaller firms compared to the official services PMI. Results published last week for the government-led poll showed the services expansion moderating for a third straight month. The manufacturing industry is struggling to rebound from months of contraction, according to official data.
--With assistance from Ishika Mookerjee and Wenjin Lv.
