China’s Caixin Service PMI rises to 52.1 in July, employment improves

China's private Caixin Service Purchasing Managers' Index (PMI) rose to 52.1 in July, up 0.9 points from June, reflecting faster expansion in the services sector, according to data released on Monday.

A reading above 50 indicates expansion, while a reading beneath 50 points to contraction.

The services industry is experiencing a rapid increase in new orders, leading to a rise in employment. This has resulted in a resurgence of optimism among enterprises, according to the Caixin survey.

According to the sub-index, the expansion speed of both supply and demand in the services sector accelerated in July, with both sub-indexes rebounding into the expansion zone.

The employment situation in the services sector also improved in July to the highest level since September 2023. Surveyed companies said they have increased manpower, mainly to cope with new businesses. 

Business optimism also rebounded in the month, with companies in the services sector hoping for improvements in market conditions and business development to drive growth in their operations.

The Caixin Service PMI reading followed the Caixin Manufacturing PMI, which dropped to 49.8 in July, down 2 points from a month earlier.

China's official manufacturing PMI came in at 49.4 in July, slightly down 0.1 point from June, according to data from the National Bureau of Statistics. The business activity index for the services sector dropped by 0.2 points to 50.0 in July.

Wang Zhe, a senior economist at Caixin, said in a statement on Monday that the business climate in the services sector improved in July, while the manufacturing sector remained under pressure.

In order to boost market confidence and address insufficient domestic demand, it is crucial to implement policy stimulus measures and ensure that existing policies are effectively in place, Wang said.

Stimulating consumption is a key focus for maintaining stable growth in the second half of the year. Two main directions to consider are increasing personal incomes through various channels and expanding services consumption, Wu Chaoming, a deputy head of the Chasing Research Institute, told the Global Times.

"We anticipate that policies supporting sectors including culture and tourism, elderly care, childcare and domestic services will be strengthened, and there is the potential for increased government spending on public services consumption," Wu said.

China will work hard to further develop consumer services to support high-quality economic development and meet people's demand for personalized, diversified and quality services, according to a guideline made public on Saturday, the Xinhua News Agency reported.