A private business survey indicates that China’s services activity grew at its slowest pace in three months in October. Respondents faced rising costs and lower selling prices, while confidence in the year ahead weakened.
The purchasing managers’ index for services, published on 4 November, fell to 50.8 from 51.6 in September. It remained above 50, the threshold separating expansion from contraction in the survey, but was at its lowest since July.
The result reversed two months of improvement in the index. It stood at 50.4 in July, before rising to 51.4 in August and 51.6 in September. October’s reading points to continued growth in activity, but at a slower pace than in the previous month.
The survey covers a panel of around 650 service companies. It includes activities such as transport, finance, real estate and business services. Responses for October were collected between 12 and 22 October, so the figures reflect conditions in that period rather than a measurement of activity after it.
New business and hiring continue
New business at the surveyed services firms continued to grow at a solid, though slightly slower, pace than in September. Companies pointed to business development and new customers. New business from overseas also increased for a sixth consecutive month, extending the longest such sequence since 2024.
Growth in new export business eased from September and remained modest. The survey therefore indicated continued growth in overseas business for the responding firms, rather than a fall in orders from abroad.
Companies continued to take on full-time and part-time staff to deal with workloads. The employment measure rose for a sixth successive month, with hiring growth picking up from September. The survey does not give a count of jobs created across the sector.
Costs and prices move in opposite directions
Services firms lowered their average selling prices for a second consecutive month. Competition and promotional discounts featured among the reasons, although the pace of price-cutting eased from September. September had brought the first fall in charges in four months and the sharpest decline since April 2022.
At the same time, the rate of increase in input costs reached a five-month high. Respondents identified higher labour, material and fuel costs. Rising costs alongside falling charges can put pressure on margins, although the survey does not establish the profit earned by any individual business.
Companies remained positive about activity over the coming 12 months, but confidence slipped to its lowest level since July. Higher costs and stronger competition were among their concerns. This outlook measures expectations at the time of the survey, not a guarantee of future growth.
A mixed picture across surveys
A separate private composite index, which combines manufacturing and services output, fell to 52.0 in October from 52.4 in September. It too indicated the slowest expansion since July. Manufacturing output growth accelerated, but that was not enough to offset the slower increase in services activity.
Earlier official figures gave a different view of non-manufacturing activity. The official index covering services and construction fell to 49.7 in October from 50.2 in September. Its services component was at 50.0, the no-change threshold, while the construction component stood at 48.0.
The official non-manufacturing measure covers construction as well as services, whereas the new private reading focuses on services. The surveys also use different panels. Their headline figures should not be treated as identical measures or as proof that every business experienced the same conditions.
A purchasing managers’ index is based on companies’ assessments of whether conditions have improved, worsened or stayed the same from the previous month. Its reading combines the share reporting an increase with half the share reporting no change and is adjusted for seasonal factors. It is not a percentage change in revenue or a direct measure of gross domestic product.
