China’s services activity contracted more than expected last month, with spending figures over the long weekend showing that a hit to consumer spending from COVID-19 curbs could linger through this month.
The Caixin China Services purchasing managers’ index (PMI) rose to 41.4 last month from 36.2 in the previous month, Caixin and S&P Global said in a statement yesterday, missing the median estimate of 46 in a Bloomberg survey of economists.
A reading below 50 signals a contraction.
Photo: AFP
COVID-19 restrictions in major Chinese cities began easing last month as case numbers dropped, raising hopes of a pickup from the worst activity levels since early 2020. Shanghai began lifting its two-month long lockdown last week and Beijing has rolled back restrictions as well.
However, the road to recovery could be a long and bumpy one, with regular COVID-19 testing becoming the norm and some controls remaining in place.
Figures from the three-day Dragon Boat Festival from Friday last week showed spending remains depressed.
Domestic tourism revenue dropped 12.2 percent from a year ago, while the number of trips made was down 10.7 percent, data from the Chinese Ministry of Culture and Tourism showed.
China’s service industries posted further declines in business and new orders last month, the PMI statement said.
“May’s reading was the
second-lowest since February 2020, as China’s COVID-19 epidemic still weighed heavily on services activities,” Caixin Insight Group (財新智庫) senior economist Wang Zhe (王?) said in a statement.
“Entrepreneurs overall were still confident that the COVID-19 epidemic will be brought under control, though some remained concerned about a resurgence of COVID-19 in the future,” he said.
Citigroup Inc economists said the drop in travel and spending over the long weekend was smaller compared with those seen during the Workers’ Day holiday last month, which suggest a recovery is under way.
The improvement will likely accelerate from this month onward, they said.
The Caixin survey findings are largely in line with those in the official non-manufacturing purchasing managers’ index, which increased to 47.8 from April’s 41.9, but stayed below the cutoff 50 mark.
The official survey tracks larger companies and includes the construction sector, while the Caixin survey focuses more on smaller ones.
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