China's service slump: China experienced a slowdown in the growth momentum of its services sector in February, according to the latest Caixin PMI data. The survey revealed a marginal decline in the services purchasing managers' index to 52.5 from 52.7 in January, though it remained above the 50-mark indicating expansion for the 14th consecutive month. This contrasts with official figures released last week, which depicted a faster expansion in service activity, presenting a mixed view of the sector's condition.

Despite robust activity observed during the Lunar New Year holidays, the growth rate of new business remained relatively stagnant compared to January. Notably, foreign demand reached its highest level since June the previous year, driven by increased customer orders in international markets. However, outstanding business decreased for the first time since July 2022, and employment numbers in the service sector declined in February after slight expansions in the previous two months.

Confidence hits low

This decline in employment and business sentiment led to a four-month low in business confidence, with companies adopting a more cautious approach to forecasts due to subdued market conditions and expectations of muted client spending. China's economy continues to face challenges in its post-COVID recovery, grappling with issues such as a property crisis, cautious consumer spending, and difficulties in finding buyers for manufactured goods.

In response to these challenges, Chinese policymakers have implemented various measures over the past year, including significant cuts to banks' reserve ratios in January. Additionally, the government recently approved a plan aimed at stimulating demand through large-scale equipment upgrades and boosting consumer goods sales.

(With Reuters Inputs)