China Services PMI Plunges to 50.4, Missing 53.7 Forecast

Service providers kept adding staff. Employment rose for a third consecutive month, the longest run of job creation since the second half of 2024. Firms linked the hiring to business expansions and higher project workloads. Backlogs of work rose for a ninth consecutive month, the longest such streak since 2023. The pace of accumulation slowed because hiring kept better pace with incoming work. The labour market, RatingDog said, was holding up better than activity growth, a divergence that could complicate policymakers' decisions on further stimulus.

Price pressures diverged. Input costs rose for a seventeenth consecutive month, at the weakest pace since January and easing further from May's 19-month high. Firms reported relief on raw materials, labour, advertising and diesel. Output charges, by contrast, rose for a second consecutive month, the first back-to-back increase in the sector's prices in a year and a half. Firms pointed to cost pressures and rising insurance premiums.

Business confidence about the year ahead softened to its lowest level since February 2020. Firms still cited expansion plans and new product launches as reasons for optimism, though some took a more cautious stance on the broader economic outlook.

Yao Yu, founder of RatingDog, said the services sector had seen a notable slowdown in July. Exports that kept growing and sustained hiring offered offsetting signals, he said. The pace of any recovery, he added, would depend on the strength of domestic demand and business confidence.