A private gauge of China's services sector signaled the slowest pace of activity growth in eight months in June, reflecting the trend seen in official data.

The Caixin services purchasing managers index dropped to 51.2 in June from 54.0 in May, its lowest level since October 2023, Caixin Media Co. and S&P Global said Wednesday.

The index stayed in expansion territory for an 18th straight month, indicating that China's service economy continued to grow into the end of the second quarter, albeit at a slower pace. A reading above 50 suggests expansion, while one below indicates contraction.

Business activity and total new orders grew for the 18th month in a row but both at a slower pace in June, while the gauge for new orders hit a four-month low, according to Caixin. Meanwhile, new export orders grew for the 10th straight month thanks to strong external demand driven by robust tourism spending, said Caixin.

The private survey pointed to a worsening employment situation in the services sector, with businesses continuing to express strong motivation to reduce payrolls and an unwillingness to fill vacant positions. The subindex for employment stayed in the contraction for the fourth time in five months, according to Caixin.

The slower rate of expansion was reflected in a decline in sentiment. The gauge for market optimism managed to stay in positive territory in June, but was significantly below the historical average, reaching the lowest level since March 2020, said Wang Zhe, senior economist at Caixin Insight Group.

"The market was concerned about downward pressure on the economy," Wang added.

Prices were also under pressure in June, the data showed. Input costs and prices charged by service providers both declined from May, indicating limited inflationary pressure, Wang said.

China's official nonmanufacturing PMI, which covers both service and construction activity, declined to 50.5 in June from 51.1 in May. The subindex tracking service activity fell to 50.2 in June compared with 50.5 in May, while the construction subindex fell to 52.3 from 54.4, according to official data.


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07-02-24 2250ET