China's Service Activity Increasing As Consumerism Returns To Normal

China's service activity increased for the fourth month in a row in April, according to a private-sector survey released on Friday, as businesses continued to benefit from a return to pre-pandemic levels of demand and output, though growth slowed slightly.

The Caixin/S&P Global services purchasing managers' index (PMI) fell to 56.4 in April from 57.8 the previous month, remaining above the 50-point threshold that separates monthly expansion and contraction in activity.

The figure mirrored the official PMI, which showed a slightly slower rate of growth on Sunday.

China's economy expanded faster than expected in the first quarter, as businesses and consumers recovered from the chill of strict COVID curbs lifted in December.

With strong activity in services and a contraction in manufacturing, the world's second-largest economy is experiencing an uneven recovery and some persistent headwinds.

China's tourism rebounded to pre-COVID levels during the five-day May Day holidays, with domestic travel increasing by more than two-thirds year on year, according to government data.

"A number of indicators indicate that the recovery has yet to find a stable footing," said Wang Zhe, senior economist at Caixin Insight Group.

In April, surveyed service firms' production activity and new orders, including new export orders, increased for the fourth consecutive month.

Caixin Group attributed the increase in activity to a return to more normal operating conditions as the impact of COVID-19 faded.

Operating expenses for service companies increased to a 12-month high, owing to higher staffing costs and higher raw material prices. However, companies' ability to pass on rising costs to customers has been hampered by efforts to attract new orders.

"In the future, relevant policies should focus on expanding domestic demand, stabilising employment, and improving expectations, as well as improving the monetary transmission mechanism and creating a virtuous circle of economic development," Wang said.

China will continue to support the economy, focusing on domestic demand, which remains inadequate, said the Politburo, the ruling Communist Party's top decision-making body, last week.