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The services sector in China dropped into contraction territory in August, the latest survey from Caixin revealed on Friday with a services PMI score of 46.7.

That’s down sharply from 54.9 in July and it falls beneath the boom-or-bust line of 50 that separates expansion from contraction.

Chinese services companies signaled a renewed fall in business activity during August, as rising COVID-19 case numbers at home and abroad impacted operations and demand. Notably, it was the first time that output and new work had fallen since April 2020.

At the same time, companies reported a slight reduction in workforce numbers, which contributed to a sustained rise in outstanding business. Prices data meanwhile highlighted a softer rise in input costs, while prices charged fell slightly due to efforts to secure new business.

In line with the trend for business activity, total new orders received by Chinese services companies fell midway through the third quarter. Thought only slight, it marked the first fall in sales for 16 months. Survey respondents often mentioned that the pandemic had dampened customer demand. New export business was meanwhile broadly unchanged for the second month running.

The survey also showed that the composite index fell to 47.2 in August from 53.1 in July.


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