Key Points
- 01China’s RatingDog General Services PMI slipped to 50.8 in October
- 02Services expansion remained above the 50 growth threshold
- 03New export business rose for a sixth straight month
- 04Firms faced rising input costs and weaker business confidence
China services growth slows in October
China’s services sector expanded in October but at its slowest pace in three months, as firms confronted rising costs and softer sentiment. The RatingDog China General Services PMI fell to 50.8 in October from 51.6 in September, marking its weakest reading since July while still remaining above the 50 level that separates growth from contraction.
Activity continued to grow in October but with less momentum, highlighting a more cautious operating environment for service providers. The slowdown came as companies reported intense competition and limited support from seasonal factors such as the Golden Week holiday.
Demand, exports and employment
Despite the moderation in headline growth, overall demand conditions showed some resilience. New business continued to grow at a rate broadly unchanged from September, indicating that domestic client activity was still expanding even as overall confidence softened.
External demand provided a notable support. New export business increased for the sixth consecutive month, extending what has become the longest continuous growth streak in export orders since 2024. To cope with existing workloads, services firms continued to add both full- and part-time staff, pointing to ongoing, if moderating, expansion in activity and employment.
Pricing pressures and rising input costs
Competitive pressures weighed on firms’ pricing power. Increased competition led services providers to lower their average selling prices for a second straight month, even as cost pressures intensified. The combination of softer output prices and higher costs suggests a squeeze on margins across the sector.
Input prices rose at their quickest pace in five months, driven by higher costs for input materials, fuel and wages. These rising input costs, alongside the need to remain competitive on pricing, created a challenging backdrop for profitability in October.
Business confidence weakens
Sentiment among services firms deteriorated during the month. Business confidence slipped to its lowest level since July, reflecting concerns over rising input prices and heightened competition. This weakening confidence occurred even as activity and new business continued to expand.
The combination of slower headline growth, firmer cost pressures and reduced pricing power has left service providers more cautious about the outlook. While the sector remains in expansion territory, the October survey showed a more fragile recovery, with companies balancing ongoing demand and hiring against mounting competitive and cost challenges.
Key Takeaways
- 01China’s services sector is still expanding but at a clearly slower pace, with the PMI just above the growth threshold and at its weakest level in three months.
- 02Resilient domestic demand and a six-month run of export growth are supporting activity, allowing firms to keep adding staff despite softer overall momentum.
- 03Rising input costs and the need to cut selling prices under competitive pressure are squeezing margins and undermining business confidence.
- 04Weaker sentiment, linked to higher costs and intense competition, suggests that services firms are more cautious about future conditions even as current activity continues to grow.