China's services sector contracts in August - Caixin

China’s services sector contracted in August amid restrictions to curb the Delta variant of Covid-19, according to data released on Friday.

The Caixin services purchasing managers’ index slid to 46.7 from 54.9 in July, coming in well below consensus expectations for a reading of 52.0. This marked the lowest level for the PMI since April 2020.

A reading above 50.0 indicates expansion, while a reading below signals contraction.

Wang Zhe, senior economist at Caixin Insight Group, said: "Service costs were still under great pressure amid elevated labour and transportation costs amid the Covid-19 resurgence.

"Sluggish market demand limited businesses’ bargaining power, causing prices charged by service providers to slip after a month of growth."

Pantheon Macroeconomics economist Freya Beamish said: "The July reading was taken in a Delta sweet spot, leaving the August PMI with further to fall.

"We’ve warned that August would be nasty, and consensus looked quite high to us, but downside risks now appear to be materialising. Both the output and new work indices fell below 50, as the authorities reimposed widespread restrictions to stop the spread of the Delta variant. That effort has been successful, for now, meaning that the index should bounce back strongly in the current month, but Q3 is looking like a wipeout."