China’s services sector exceeded expectations in July, according to the latest Caixin PMI data, highlighting resilience amid a broader economic slowdown. The Caixin Services PMI rose to 52.1 in July, up from 51.2 in June and surpassing forecasts of 51.4. This marks the 19th consecutive month of expansion for the sector, with readings above 50 indicating growth.
The robust performance in the services sector was fueled by steady demand both domestically and internationally, as well as a rebound in tourism. However, the data also revealed that external demand, as indicated by the relevant sub-index, reached its lowest point in 11 months, reflecting overall weak demand conditions.
In contrast, manufacturing PMIs released last week by both Caixin and government sources showed contractions in the sector, underscoring the ongoing challenges facing China’s industrial base. Despite the support from the services sector, these challenges have tempered overall economic strength.
In response to these issues, Beijing has implemented a series of more accommodative monetary policies aimed at boosting demand and inflation. However, the impact of these measures has been limited, with investors hoping for more substantial support.
The services sector has provided some economic buoyancy, but it has not fully offset the weaknesses in manufacturing and industrial production, which remain crucial to China’s economic engine. The economy’s growth in the second quarter was below expectations, highlighting ongoing concerns about the overall economic trajectory.
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