2023-05-05 06:49:00
For the fourth affiliate month, the services business is in good shape in China. The Purchasing Managers’ Index (PMI), calculated by the IHS Markit firm and published by the Caixin media group on Friday, May 5, stood at 56.4 points in April, against 57.8 in March. Despite this slight drop, the index remains well above the 50 threshold which, as a reminder, reflects an expansion in activity.
The level for this month of April turns out to be the second fastest pace since November 2020, after that of March. In any case, this is an increase similar to that reported by the government survey published on Sunday.
Resumption of cautious consumption
The Chinese economy therefore grew in the first quarter, at a faster pace than expected, as businesses and consumers were able to forget the strict health measures in force until the end of December. China has, in fact, applied for nearly three years a very strict health policy against Covid-19 with almost compulsory PCR tests, confinements and travel restrictions, which heavily penalized the economy. These measures were abruptly lifted in December and after a strong rebound in the number of patients in the following weeks, the situation has now stabilized, allowing activity to rebound.
In fact, the Chinese are back in restaurants, train stations and airports as well as in tourist places, helping to revive services. At the end of April, the Chinese were also able to take advantage of the Labor Day holiday which traditionally gives rise to short tourist stays, and is conducive to consumption.
“Consumption saw a recovery in the first quarter partly due to a catch-up, but it has not yet recovered to pre-pandemic levels,” However, underlined in mid-April Teeuwe Mevissen, an analyst at RaboBank.
The economist, Harry Murphy Cruise, for the rating agency Moody’s, also plays the card of caution. “Households have a long memory and it will take time for them to forget the difficulties” of recent years and return to a pre-pandemic level of spending, he believes. He notes, in fact, that nearly 60% of households in the city want to save more than invest or consume, according to a survey by the Chinese central bank. They were around 45% before the pandemic.
As for tourism, “the lifting of international travel restrictions has boosted services exports”, says economist Wang Zhe for Caixin. The country has resumed issuing all types of visas and in particular tourist visas for European nationals since March 15, 2023.
Growth driven by services
Despite this confirmed recovery in activity in April, the companies surveyed also reported an increase in their costs for the 34th consecutive month, mainly with regard to labor and raw materials, notes Caixin.
The composite index, which combines services and manufacturing industry, thus experienced, last month, a decline to 53.6 points, against 54.5 in March which was then its highest rate for nine months.
“In April, the services sector continued its recovery trajectory, while manufacturing activity remained sluggish and weighed on economic growth,” raises Wang Zhe.
China’s gross domestic product (GDP) rose 4.5% year on year in the first quarter, its fastest pace in a year. An increase largely driven by household consumption, while the resumption of activity in factories and the rebound in real estate are slow to really materialize for the time being. The country is aiming for 5% GDP growth this year, a goal that could be difficult to achieve, Chinese Premier Li Qiang has previously warned.
(with agencies)
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