China’s Caixin Services Purchasing Managers’ Index (PMI) rose to 52.0 in October 2024, up from 50.3 in September and exceeding market forecasts of 50.5. This increase reflects renewed momentum in the service sector, bolstered by new support measures from Beijing aimed at stimulating economic growth. The reading is the highest since July, indicating expansion in the sector as it continues to recover from a recent slowdown.

Boost in New Business and Export Orders

The October PMI data shows a positive turnaround in new business inflows, which increased for the first time in four months. Export orders also exhibited solid growth, reflecting stronger demand from overseas markets. These gains highlight an encouraging shift in market sentiment and suggest that Beijing’s economic support measures may be starting to have an impact on business activity and consumer confidence.

Employment and Rising Backlogs

Employment within China’s services sector recorded slight gains for the second consecutive month, signaling a cautious yet steady recovery in labor demand. However, backlogs of work continued to rise, suggesting that while businesses are seeing more orders, capacity may still be limited, creating pressure on service providers to keep up with demand. This backlog increase underscores the ongoing challenges in aligning resources with rising business volumes.

Price Pressures and Stabilized Output Prices

Higher input costs remain a challenge, with material and energy prices continuing to climb, though at a slower pace than in previous months. Output prices, however, stabilized after two months of declines, indicating that service providers are managing to pass on some of these increased costs to consumers. This stabilization in output prices may provide further support to profit margins as businesses navigate fluctuating input costs.

Improved Business Confidence

A notable aspect of the October data is the boost in business confidence, which has reached a five-month high. This improvement is largely driven by optimism for economic recovery and the effectiveness of promotional efforts aimed at attracting more customers. The overall sentiment suggests that service providers are increasingly confident in the potential for sustained growth as the government continues to roll out supportive policies.

Conclusion: Positive Outlook for China’s Services Sector

In summary, the rise in China’s Caixin Services PMI to 52.0 in October 2024 reflects a significant improvement in the country’s services sector. With gains in new business, export orders, and employment, alongside stabilized output prices and stronger business confidence, the sector appears to be on a path to recovery. While challenges remain, especially in managing input costs, the overall outlook is positive as businesses and consumers respond to Beijing’s economic support measures. As the sector continues to build momentum, sustained policy support and effective resource management will be key to fostering long-term growth.