China’s services PMI hits 10-month low as demand falters

China's private-sector services activity slowed sharply in July, with a closely watched gauge falling far short of expectations and adding to a string of weak economic data that has intensified questions about the trajectory of the world's second-largest economy.

Services Expansion Nearly Stalls

The RatingDog China General Services Purchasing Managers' Index, compiled by S&P Global, fell to 50.4 in July from 54.1 in June, according to data released Wednesday. The reading missed the median Bloomberg consensus forecast of 53.7 and marked the weakest expansion since September 2024. The Composite Output Index, which combines manufacturing and services, declined to 50.8 from 53.6, signaling the slowest pace of overall private-sector growth in a year.bloomberg+5

The slowdown was driven primarily by softening domestic demand. New business growth weakened to its lowest pace since March, while business confidence fell to its lowest level since February 2020. RatingDog founder Yao Yu said confidence "was linked to business expansion plans, new projects and promotional campaigns, though some firms adopted a more cautious stance on the economic outlook".actionforex+1

Broader Weakness Across the Economy

The private survey roughly tracked the official PMI from the National Bureau of Statistics, which showed services activity slipping into contraction in July for the first time since April. Official manufacturing PMI also fell unexpectedly to 49.2, its first contraction in five months, as new orders dropped to their lowest since 2023.theedgemalaysia+2

Not all signals were negative. Employment in the private services survey rose for a third consecutive month, the longest stretch of hiring since the second half of 2024, and backlogs of work increased for a ninth straight month. Input cost inflation eased to its weakest since January, offering some relief to businesses.investing+1

Policy Response in Focus

"The headline PMI plunge reflects a sharp cooling in domestic demand, but the underlying engine hasn't stalled," said Henry Hao, senior economist at Commerzbank in Singapore. "Resilient export activity, long-term backlog growth, and sustained job creation show that while the Chinese service sector is tapping the brakes, it is still expanding".theedgemalaysia

Top officials pledged at a key policy meeting last week to roll out "effective new policies in a timely manner" but stopped short of introducing fresh stimulus measures, even as Beijing targets an economic growth rate of 4.5% to 5% this year. Investors are now watching for targeted support, particularly in consumption and infrastructure, as the services sector — which accounts for more than half of China's GDP — continues to lose momentum.cryptorank+2