China services sector blasts past expectations in July

China’s services sector was more than buoyant in July, with data released overnight on Wednesday blasting past market expectations.

The Caixin/Markit services purchasing managers’ index (PMI) rocketed to 54.9 in July, from 50.3 in June, well above the consensus forecasts for a minimal rise to 50.5.

In the survey, panellists suggested that containment of the virus domestically helped boost demand.

“It’s positive that demand seems to be raring to go, in the right conditions, but we are wary of reading that as sustainable, for now,” said Pantheon Macroeconomics chief Asia economist Freya Beamish.

“July seems to have benefitted from a lull in Covid damage between the initial Delta scare, and the renewed, and alarming, pick-up in cases in the last part of the month, much of which happened after the data collection period of 12 to 22 July, though numbers were already rising during the survey.

“The index seems likely to drop back in the current month as widespread restrictions are reimposed to tackle Delta.”

High new order rises led to an expansion of headcount after a reduction in June, the survey said, with a renewed increase in the backlog of works at the hastiest cadence for more than a year, though “still modest”, according to Beamish.

“Price rises were sharp, suggesting Delta has not yet curbed the service price rebound, though we’ve pencilled in slower rises in the next few months, for now, despite intense pressure to repair margins in the sector.”