China’s services sector saw a sharp slowdown in April, with the Caixin/S&P Global survey reporting a drop in the services PMI from 51.9 in March to 50.7. This missed expectations, as analysts had predicted it to remain at 51.8. A PMI score above 50 indicates growth, but the recent decline suggests weakening demand in this sector. The slowdown comes amid increasing pressure from U.S. tariffs, adding to the overall economic strain.
Despite a positive start to the year, China’s economy is now at risk of a sharp slowdown in the second quarter. Factory activity in April has already been impacted by the U.S. tariff hikes, raising concerns about whether domestic consumption can make up for the decline in exports. This could have a significant impact on economic growth going forward.
Bloomberg analysts forecast a GDP growth rate of just 4.2% for this year, which is well below China’s official target of 5%. The future of consumer spending heavily depends on the stability of the job market, with Goldman Sachs estimating that over 16 million workers, or more than 2% of China’s labor force, could be affected by lower export demand to the U.S.
While the official non-manufacturing PMI, which includes both construction and services, recorded a reading of 50.4 in April, it still undershot expectations. The services sector has struggled to maintain positive growth, with the sub-index hovering just around the 50 mark since the beginning of 2024. This paints a picture of ongoing challenges in the services sector, which remains under pressure from external and internal economic forces.
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