BEIJING • The recovery in China's service sector activity extended into a sixth straight month in October, an industry survey showed yesterday, with hiring picking up to the highest level in a year but overseas demand slipping.
The Caixin/Markit services Purchasing Managers' Index (PMI) rose to 56.8 from September's 54.8, the highest reading since June and staying well above the 50-mark that separates monthly growth from contraction. The service sector, which accounts for about 60 per cent of the economy and half of urban jobs, had initially been slower to return to growth than large manufacturers, but the recovery has gathered pace in recent months.
Domestic demand drove activity, with the survey showing new export business received by Chinese service firms slipping further into contraction last month, at the fastest rate since July.
"The second wave of coronavirus infections in Europe and the third wave in the US have significantly suppressed China's overseas demand," said Mr Wang Zhe, senior economist at Caixin Insight Group, in comments released alongside the survey.
But firms hired more for the third month in a row and at the fastest pace since September last year, indicating a strengthening recovery in a labour market hit hard earlier in the year by the pandemic.
Service firms were highly optimistic about business prospects, with a sub-index for confidence in the year rising to the strongest level since 2012.
The official PMI showed that activity in China's service sector expanded at the fastest pace last month since 2013. Pent-up demand, stimulus-driven infrastructure expansion and surprisingly resilient exports have propelled China's rebound, though the global outlook is dimming as many Western countries battle renewed surges in virus cases, with some going back into lockdowns.
"In the coming months, a continued recovery of the Chinese economy is highly likely, but it is necessary to be cautious about the normalisation of monetary and fiscal policies in the post-epidemic period," Mr Wang said.
China's economy grew a weaker-than-expected 4.9 per cent in the third quarter from a year earlier. It is expected to expand around 2 per cent for the full year, the weakest in over three decades but still much stronger than other major economies.
REUTERS
