China’s Caixin service PMI expands to 51.4 in February

The Caixin China purchasing managers' index (PMI) for the service sector came in at 51.4 in February, edging up from 51.0 in January. Notably, it has stayed above the 50.0 mark for 26 consecutive months, underscoring the sector's consistent expansion, according to a report released on Wednesday.

A reading above 50 indicates sector expansion, while a reading below 50 reflects contraction.

This growth was driven by multiple factors. Survey respondents attributed it to increased sales, the initiation of new projects, and promotional activities. New businesses registered notable growth while overseas sales saw a significant rise, with new export business growth reaching a three-month high, according to the report.

Employment in the service sector stabilized in February following two months of contraction. Some enterprises correlated the increase in hiring to the growth in new business. 

Increased confidence in the outlook also boosted recruitment activity in the latest survey period. Optimism improved to its highest level since November. Firms are hopeful of stronger market demand and better economic conditions. To take advantage of an expected stronger business environment, companies are planning to release new services and enhance promotional efforts in the coming months.

Wang Zhe, senior economist at Caixin Insight Group, noted in a statement that the data reflects a continuous recovery in the service sector. 

The 26-month streak of activity expansion in services is a strong indication of its recovery. Service providers, supported by an improving economic environment, are rolling out new products and ramping up promotional efforts, Wang said.

“Service firms were generally optimistic about the economic outlook for the coming year and planned to accelerate efforts to boost sales," Wang added.

The Caixin Service PMI follows the Caixin China Manufacturing PMI which improved to a three-month high of 50.8 in February. That was up from January’s 50.1, as the manufacturing sector growth improves due to higher output and rising orders.

The PMI for China's manufacturing sector rose to 50.2 in February, up from 49.1 in January, official data from the National Bureau of Statistics showed Saturday.

Zhao Qinghe, a senior statistician at the bureau, attributed the rise to accelerated business resumption following the Spring Festival holiday. As businesses ramped up operations and production accelerated, manufacturing demand showed a steady recovery, according to Zhao.

China's non-manufacturing PMI came in at 50.4 in February, up 0.2 percentage points from the previous month, the official data showed.

"With the anticipated pro-growth policies aimed at boosting domestic consumption, stabilizing the real estate market and revitalizing the stock market, alongside proactive fiscal measures and the opening of major infrastructure projects across the country, we project China’s services PMI will remain stable,” Wu Chaoming, chief economist of Hunan Chasing Financial Holdings Co, told the Global Times.

Furthermore, China’s manufacturing PMI will likely continue to rebound, supported by the seasonal improvement in production activities, which provides a solid foundation for the stable performance of the manufacturing PMI. And, the accelerated development of new quality productive forces is likely to stabilize the manufacturing PMI and positively influence market expectations in the coming months, Wu noted.