China’s services sector growth slowed to a 10-month low in July as weaker domestic demand dragged down new business growth, while overall private-sector activity also lost momentum
China’s services sector expanded at its slowest pace in nearly a year in July as softer domestic demand weighed on new business growth, raising fresh concerns over the strength of the world’s second-largest economy’s recovery.
The RatingDog China General Services Purchasing Managers’ Index (PMI), compiled by S&P Global, fell sharply to 50.4 in July from 54.1 in June. The reading remained above the 50-mark that separates expansion from contraction but marked the weakest growth since September 2024.
The slowdown comes as Beijing continues to grapple with weak consumer confidence, a prolonged property sector crisis and uneven domestic spending despite a series of policy measures aimed at supporting growth.
Domestic demand loses momentum
According to the private survey, growth in new business slowed to its weakest pace since March, reflecting weaker demand conditions in China’s domestic market.
The services sector has been a key focus for policymakers as they attempt to shift growth away from reliance on exports and manufacturing. However, subdued household spending and cautious consumer behaviour have continued to limit momentum.
The weaker PMI data also contrasted with the official services PMI released earlier, which showed activity slipping into contractionary territory, highlighting differences between private and government surveys.
More from BusinessExport demand provides some support
Despite the slowdown in overall activity, China’s services exports continued to expand for the third consecutive month.
Survey respondents linked stronger overseas demand to increased activity around exhibitions, summer study tours, higher financial transaction settlements and improved business management practices.
The continued improvement in external services demand provided some relief for companies facing softer domestic conditions.
Hiring rises but confidence weakens
Chinese services firms continued to add employees in July, marking the third straight month of job creation. However, the pace of hiring slowed compared with June.
Business confidence among service providers remained positive, but sentiment weakened to its lowest level since February 2020.
The decline in confidence reflects concerns over future demand, broader economic uncertainty and challenges facing businesses despite signs of stabilisation in some sectors.
Composite PMI points to slower recovery
The Composite Output Index, which combines manufacturing and services activity, dropped to 50.8 in July from 53.6 in June.
The data suggests that China’s broader private-sector recovery lost momentum at the start of the third quarter, with both manufacturers and service providers facing headwinds.
China’s economy has been under pressure from weak domestic consumption, falling property investment and trade uncertainties. While exports have remained a relative bright spot, economists have warned that stronger consumer demand will be crucial for sustaining growth.
The latest PMI figures are likely to add pressure on Chinese policymakers to introduce further measures to boost household spending and stabilise economic activity.
With inputs from agencies.
