China services recovery stronger than expected, Caixin PMI shows

CHINA'S services activity beat expectations in June and jumped to the highest level in nearly a year, a private survey showed in the latest sign that easing Covid outbreaks and restrictions have boosted consumer sentiment.

The Caixin Services Purchasing Managers' Index (PMI) soared to 54.5 in June from 41.4 in May, according to a statement on Tuesday (Jul 5) from Caixin and S&P Global. That is the highest reading since July 2021, and far surpassed the median estimate of 49.6 in a Bloomberg poll of economists. A reading above 50 indicates expansion.

Last week, the official gauge of non-manufacturing activity showed a jump to 54.7 in June, the highest in more than a year and well above a consensus forecast. The Caixin index focuses more on smaller firms, while the official PMI tracks larger companies.

Several cities, including Shanghai, scaled back Covid restrictions in June as cases fell, allowing more shops to open, consumers to spend, and supply jams to ease. The country also recently said it would halve the quarantine time for inbound travellers.

That said, sentiment could dive again, given the threat of repeated restrictions should there be more virus flareups across the country. Infections surged over the weekend in parts of the eastern province of Anhui, where officials have issued lockdowns to try and stop the virus from spreading.

President Xi Jinping, meanwhile, last week reaffirmed the country's commitment to its Covid Zero strategy, saying it was the most "economic and effective" policy for China. BLOOMBERG