Via Financial Times

A private survey of China’s services industries has indicated an accelerated recovery in activity in the sector as consumer spending rebounds from the country’s long coronavirus lockdown.

The Caixin/Markit services purchasing managers’ index surged to a 10-year high of 58.4 last month, up from 55 in May and a nadir of 26.5 in February, when Beijing put the world’s second-largest economy into lockdown. A PMI below 50 indicates contraction.

Wang Zhe, an economist at Caixin Insight Group, publisher of the survey, said in a note that the improvement was “pointing to an accelerating recovery” of China’s service industry.

As the virus came under control, local authorities were able to ease disease lockdown measures and businesses resumed normal operation.

The figures helped lift stocks. Mainland China’s CSI 300 of Shanghai- and Shenzhen-listed shares closed up 2 per cent to a five-year high and Hong Kong’s Hang Seng index closed 0.8 per cent higher.

Other analysts, however, warned against reading too much into the survey. Zhou Hao, an economist at Commerzbank, said while the strong PMI indicated more of the businesses of many respondents were gaining strength, it did not show the full picture.

“That makes the index a misleading indicator,” said Mr Zhou, adding that many service businesses, ranging from cinemas to private schools, remained closed while others were running at low capacity.

China’s domestic railway travel plunged 49 per cent year on year in May while local airlines reported a 53 per cent drop in passengers in the same month.

Larry Hu, an economist at Macquarie Group, said consumption of services, which depended on human interaction, was weaker than that of physical goods as concerns over a second virus outbreak lingered.

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“Things are far from getting back to normal,” said Mr Hu.

Employment was a better gauge of the economy as job gains or losses had a direct bearing on local consumption, economists said.

The Caixin survey indicated that people were still losing jobs for the fifth month in a row in June, with the employment sub-index still below 50 — a sign of contraction.

That was in line with the official unemployment rate of 6 per cent in June, compared with 5 per cent or less in previous years.

The real picture could be even worse as college graduates and migrant workers, the main victims of the economic downturn, struggled with a lack of openings.

Zhiping, an online job portal popular with students and migrant workers, reported a 24 per cent year-on-year drop in positions in the first quarter of this year.

“The labour market stress means the Chinese economy will have a long way to go before making a full recovery,” said Mr Zhou of Commerzbank.