By Liangping Gao and Ryan Woo
BEIJING (Reuters) -China’s services activity expanded at the slowest pace in nine months in June, as demand weakened and new export orders declined amid a fragile trade truce with the United States, a private-sector survey showed on Thursday.
The Caixin/S&P Global services purchasing managers’ index (PMI), fell to 50.6 from 51.1 in May, marking the weakest expansion since September 2024 but remaining above the 50-mark separating expansion from contraction.
The reading was broadly in line with China’s official survey, which showed services activity easing slightly to 50.1 from 50.2 the previous month.
The Caixin PMI is considered a better read of trends among smaller, export-oriented firms, particularly along the east coast, while the official PMI primarily tracks large and medium-sized enterprises, including state-owned companies.
“Recently, major macroeconomic indicators have shown divergence, with consumption in certain sectors increasing beyond expectations, while the momentum of growth in investment and industrial production has weakened,” said Wang Zhe, Senior Economist at Caixin Insight Group.
“We must recognise that the external environment remains severe and complex, with increasing uncertainties. The issue of insufficient effective demand at home has yet to be fundamentally resolved,” Wang added.
Deepening deflationary pressures and a persistent property crisis continued to undercut demand and growth in the world’s second-largest economy.
While the U.S. and China have settled on a framework trade deal, analysts expect eventual U.S. tariffs to remain well above historic levels, maintaining pressure on exporters and officials to find alternative markets or boost domestic demand.
Expansion in both supply and demand moderated in June, with the new orders sub-index slowing. External uncertainties weighed on service exports, leading to a decline in new export business for the second consecutive month, the fastest rate of contraction since December 2022.
Service providers remained cautious on hiring, leading the employment sub-index to decline in June after a previous increase. This led to the fastest accumulation of outstanding business in a year.
A slower increase in average input costs, combined with competitive pressures, resulted in the steepest decline in output charges in over three years in June, suggesting intense market competition.
While overall sentiment within the service sector stayed positive, business expectations remained largely unchanged from May.
The Caixin China General Composite PMI rose to 51.3 in June from 49.6 the previous month.
(Reporting by Liangping Gao and Ryan Woo; Editing by Sam Holmes)
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