Due to the continuous impact of the COVID-19 epidemic, China's service industry continued to contract in March this year with a PMI 43.0 lower than the neutral 50.0 point.
However, the decline in production and new orders was relatively moderate compared with February, with the PMI 26.5, as China earlier took more stringent measures to reduce the spread of the virus.
The decline of service industry output value is closely related to the impact of COVID-19 related restrictions, which have led to store closures and travel restrictions in recent months. In March, customer demand continued to be low, resulting in a further reduction in the total number of new businesses. However, despite the industry's continuing contraction, the rate is significantly lower than in February.
As the outlook is challenging, service providers have implemented cost-cutting policies to reduce the number of employees at the fastest pace since September 2015. However, after a sharp decline in February, the company's average input cost rose in March. At the same time, as one of the measures to increase sales, companies cut prices again, which is the highest decline since April 2009.
According to Dr. Zhengsheng Zhong, Chairman and Chief Economist at CEBM Group, business confidence remains low. “The epidemic will have a longer-term impact on service companies than on manufacturing enterprises, as some of the missed consumption during the outbreak…cannot be recouped” said Dr. Zhong.
He further highlights the necessity of government policies to stimulate consumer spending.
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