China services activity falls to 7-month low on tariff impact

The news: China’s services activity expanded at the slowest pace since September last month, with new orders growth softening as US tariffs add uncertainty to global trade.

The numbers: The Caixin S&P Global services purchasing managers' index (PMI) fell from 51.9 in March to 50.7 in April, its lowest reading in seven months. The median forecast of economists surveyed by Bloomberg was 51.8, with the 50-mark point separating expansion from contraction.

The context: The weak data adds to fears that China’s economy is at risk of a sharp slowdown in the second quarter, following last week’s official PMI for the country seeing factory activity contract more than expected. Caixin explained that disruptions to goods trade amid Trump’s 145% tariffs had negatively impacted some service providers in April, and led to the slowest rise in overall new work for 28 months.

Wang Zhe, senior economist at Caixin Insight Group said that market improvements were limited in April as the US-China trade war took hold. Wang added that the gauge measuring market optimism fell to one of its lowest levels on record: “Service providers expressed concerns over the effects of US tariffs. The indicator for expectations of future activity, though still in expansionary territory, fell to the second-lowest level on record, only higher than the reading in February 2020 — when the Covid outbreak hit the country.”