China’s services sector expanded slightly more than expected in October, according to private PMI data released Wednesday, though the pace of growth slowed compared to the previous month amid ongoing economic headwinds.
The RatingDog Services PMI came in at 52.6, just above forecasts of 52.5, but below September’s 52.9. While the reading indicates continued expansion, it points to moderating momentum in the sector.
Export Weakness and Lower Staffing Weigh on Growth
The softer reading was mainly driven by a drop in exports, coupled with weaker employment levels and subdued output prices. Despite these challenges, China’s services industry has stayed in expansion territory since January 2023, remaining a key support for an otherwise slowing economy.
Wednesday’s figures followed official government PMI data that showed another month of contraction in manufacturing activity, highlighting a growing divergence between the two sectors.
Trade Tensions and Domestic Demand Trends
The RatingDog report noted that export-oriented industries contracted in October amid renewed U.S.–China trade tensions. However, analysts expect these pressures to ease gradually after both nations reached a new trade agreement last week.
“While complex trade conditions hindered exports, stronger domestic demand continued to drive new orders,” said Yao Yu, founder of RatingDog. “Persistent declines in employment and ongoing pressure on profit margins remain the main challenges for the services sector.”
Calls for More Policy Support from Beijing
China’s broader economy continues to face deflationary pressures, high U.S. tariffs, and fading benefits from earlier stimulus measures. October’s PMI results underscored the need for additional policy support, as growth remains uneven.
Government officials have pledged to introduce further stimulus, following discussions at a high-level economic meeting in late October. Markets are now watching closely for new fiscal or monetary measures from Beijing to sustain momentum through the end of the year.
