Economic Buzz: China services business growth continue to expand in October

China?s service sector continued to expand at the start of the final quarter of the year, according to latest PMI data. Growth in services activity was supported by a faster rise in overall new business, though export sales fell modestly. Meanwhile, better efficiency led to the first reduction in outstanding business in seven months.

Staffing levels also declined, which was partly due to cost concerns. Despite higher input prices, output charges fell fractionally, while business confidence regarding the year ahead softened.

The headline RatingDog China General Services Business Activity Index fell slightly from 52.9 in September to 52.6 in October. Posting above the 50.0 neutral mark, the latest reading indicated another expansion of services activity in China, thereby extending the current period of growth that began in January 2023. That said, the rate of increase was the softest in three months.

The latest rise in services activity was driven by a further upturn in new business, with the rate of new order growth quickening notably from September.

Despite greater inflows of new work, service providers were able to lower their level of outstanding business for the first time since March.

Meanwhile staffing levels fell as capacity pressure eased in October. Indeed, average input prices increased again at the start of the fourth quarter.

In contrast to the trend seen for input prices, average charges fell fractionally in October as companies opted to absorb cost increases to support sales amid rising competition. Overall sentiment regarding the one-year outlook for activity remained positive across the service sector in October.

The Composite Output Index posted above the 50.0 no-change threshold at 51.8 in October, down from 52.5 in September. This indicated that overall activity increased for a fifth straight month but at a softer pace due to weaker increases in output across both the manufacturing and service sectors.

Total new business also expanded at a slower rate, dampened in part by a fresh fall in new export work. At the same time, job shedding continued for a third consecutive month amid signs of reduced pressure on capacity.

Finally, cost pressures intensified in October, but both goods producers and service providers opted to lower their selling prices, while there was a broad-based reduction in optimism regarding future output.

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