China’s economy got another boost in September as the services industry recorded its fifth consecutive month of strong growth.
Output and new orders are rising steadily, allowing employers to ramp up hiring according to the Caixin purchasing managers’ index (PMI) survey from IHS Markit. It marks a steady return to growth after six months of falling employment
Domestic demand is leading the recovery, with international orders still subdued as the world’s second-largest economy outpaces those countries that are still suffering from the coronavirus pandemic.
The PMI score rose to 54.8, the highest level in three months. Any number of above 50 indicates growth compared to the previous month.
Markets reopened after the eight-day Golden Week holiday, celebrating the expansion with China’s currency jumping by the most in more than four years.
Shares on the Shanghai Composite index rose 1.7pc on the stronger numbers.
Economists said it all added to growing signs of steady recovery.
“Goods sales were stronger than consumer services. The virus containment provided the basic public health conditions for holiday activities. Household purchasing power recovered steadily. And consumer confidence also came back on overall economic recovery,” said Xiangrong Yu at Citi.
“Looking ahead, the solid Golden Week sales bode well for a low single-digit growth of retail sales in the fourth quarter, after turning positive in August.”
Analysts at ING said the Chinese Government’s plans to boost the economy through “internal circulation” of domestic spending appears to be working.
“The source of growth for internal circulation is domestic demand from domestic consumption, new-infra and traditional infrastructure investment. Policies are planned to boost internal circulation,” said Iris Pang.
“The idea is that this source of growth will drive the job market and with more people returning to work following redundancies due to Covid-19, they will spend more and drive growth faster.”
Domestic travel in particular appears to be generating service sector jobs, while retail sales are also rising.