BEIJING—China’s services activity contracted for a third straight month in May, pointing to a slow recovery ahead despite the easing of some COVID-19 lockdowns in Shanghai and neighboring cities, a private business survey showed on June 6.
The Caixin services purchasing managers’ index (PMI) rose to 41.4 in May from 36.2 in April, edging up slightly as authorities began to roll back some of the strict restrictions that have paralyzed the financial city of Shanghai and roiled global supply chains.
However, the reading remained well below the 50-point mark that separates growth from contraction on a monthly basis.
Analysts say weakness in the services sector, which accounts for about 60 percent of China’s economy and half of urban jobs, is likely to persist under the regime’s zero-COVID policy, with contact-intensive sectors such as hotels and restaurants bearing the brunt of the fallout.
An official survey on Tuesday also showed the services sector was still mired in contraction.
The Caixin survey showed new business, including new export orders, fell for the fourth straight month in May as restrictions on mobility kept customers at home and disrupted operations.
That led services firms to reduce their payrolls at a sharper rate, with a sub-index for employment standing at 48.5, the lowest since February last year and down from 49.3 the previous month.
Official data showed China’s nationwide survey-based jobless rate had climbed to 6.1 percent in April, the highest since February 2020 and well above the authorities’ 2022 target of below 5.5 percent.
“The employment measure has remained in contractionary territory since the beginning of this year. The impact of the epidemic has hit the labour market. Enterprises weren’t much motivated to increase hiring. As a result, outstanding business (backlogs) in the services sector grew further,” said Wang Zhe, Senior Economist at Caixin Insight Group.
China’s economic activity cooled sharply in April as the zero-COVID policy brought the country’s commercial and manufacturing hubs, like Shanghai, to a halt.
Caixin’s May composite PMI, which includes both manufacturing and services activity, rose to 42.2 from 37.2 the previous month. Factory activity shrank less sharply in May but still posted the second largest slump since February 2020, suggesting a recovery remains fragile.
The Caixin PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in China.
