China's Jan services activity expands at slower pace

BEIJING (Reuters) – China’s services activity expanded at a slightly slower pace in January as new orders fell, a private-sector survey showed on Monday, suggesting a soft start for the world’s No.2 economy amid tepid demand and a property slump.

The Caixin/S&P Global services purchasing managers’ index (PMI) edged down to 52.7 from 52.9 in December, but remained above the 50-mark that separates expansion from contraction for the 13th consecutive month.

The figure comes after official data last week showed factory activity contracted again, offering a snapshot of the state of the economy at the start of the year.

China’s economy is struggling to regain momentum, facing multiple challenges including persistent deflationary pressures, a prolonged housing downturn and mounting local government debt.

The government is drawing on a well-used playbook of using government debt to fund infrastructure to help lift the economy as consumers are wary of spending amid uncertainty on income.

In January, new orders expanded at a slower pace with the index falling to 51.5 from 53.7 in December. Companies, hence, marginally increased headcount for the second consecutive month, said the survey.

The prices charged subindex fell for the first time since April 2022. The survey attributed that a number of monitored firms cut their fees to attract new customers and to boost sales.

“The economy contends with significant challenges marked by numerous uncertainties and adverse factors,” said Wang Zhe, Senior Economist at Caixin Insight Group. “This status quo has yet to experience a fundamental reversal.”

Service sector business confidence for the year ahead was the lowest in three months.

The Caixin/S&P’s composite PMI dipped to 52.5 last month from 52.6 in December.

“Given that there is still room for further adjustments in fiscal and monetary policies, policy measures need to be strengthened,” said Wang. “Crucially, policies should facilitate effective communication and positive interaction with the market.”

The country will maintain fiscal expansion this year to spur an economic recovery, vice finance minister Wang Dongwei said last week, reinforcing market views that public spending will be the government’s main tool to lift growth.

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