05-Mar-2025 08:23

China's service sector continued to expand in February, with higher activity supported by another modest increase in new business volumes.

Employment numbers also stabilised following two months of contraction, whilst confidence in the outlook improved to its highest level since last November.

A fractional decline in input prices and market competition helped explain a first (albeit marginal) decline in output charges for the first time in three months.

After accounting for seasonal factors, the headline Caixin China General Services Business Activity Index recorded 51.4 in February.

That was an improvement on January's reading of 51.0 and represented a modest expansion of the service sector.

Moreover, the headline index has now posted above the crucial 50.0 no-change mark for 26 months in a row to signal a sustained period of continuous growth.

Panellists reported that February's expansion of activity was driven by a combination of higher sales, the start-up of new projects and promotional work.

Increased new business volumes were indeed recorded during the month, although growth was also modest and ' as was the case with activity ' still below its historical trend level. Still, firms reported an improvement in general market demand and heightened success in converting this into actual new contract wins.

Foreign sales also rose since January, with growth of new export business solid and its highest in three months.

The Composite Output Index improved to a level of 51.5 in February, up from 51.1 at the start of the year and a three-month high.

Modest growth rates in output were recorded across the manufacturing and service sectors, linked to strengthened gains in new orders. Having declined at the fastest rate in over two years during January, latest data showed only a marginal decline in staffing levels overall. Backlogs of work rose slightly for the first time in 2025 so far as mild capacity pressures persisted in manufacturing.

Finally, latest PMI price data showed the joint-slowest rise in input costs since mid-2023 whilst output charges continued to fall at a marginal pace.

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