By Caixin and IHS Markit

China’s service sector expanded at a softer rate at the start of 2021, with companies signalling the weakest increase in business activity for nine months. Concurrently, the total amount of new work rose at the softest rate since last August, partly due to a slower increase in export sales, amid reports that customer demand was dampened by the ongoing the coronavirus disease 2019 (COVID-19) pandemic. On the employment front, staffing levels rose only slightly during January. Input costs meanwhile increased at a sharper pace, but prices charged inflation eased to a modest rate.

The headline seasonally adjusted Business Activity Index dipped from 56.3 in December to 52.0 in January, to signal a modest expansion of Chinese business activity. Notably, the reading pointed to a further loss of momentum since November and was the slowest rate of growth recorded over the current nine-month period of expansion. In line with the trend seen for business activity, total new work received by Chinese services companies expanded at a softer rate in January.

Though strong, the latest upturn in sales was the slowest since last August. At the same time, new orders from overseas increased at the weakest pace for three months. According to panel members, higher sales were driven by a further recovery of customer demand and new client wins. However, there were also reports that the recent rise in virus cases globally had weighed on new work at the start of 2021.

Key findings: Business activity expands only modestly amid weaker upturn in sales
Staffing levels increase at slower rate
Input cost inflation accelerates to second-sharpest since early-2012