GROWTH in China’s services sector accelerated in July, a private survey showed yesterday, although the spread of the COVID-19 Delta variant threatens to undercut the recovery.

The Caixin/Markit services Purchasing Managers’ Index (PMI) rose to 54.9 in July, the highest since May and up from 50.3 the previous month. The 50-point mark separates growth from contraction on a monthly basis.

The better readings in the private survey, which focuses more on smaller firms in coastal regions, stood in contrast with findings in an official survey Saturday which showed growth in the services sector retreat slightly in July.

China’s services sector has been slower to recover from the pandemic than manufacturing, but has been helped by a gradual improvement in consumption in recent months.

The July readings were buoyed by the successful containment of COVID-19 cases in Guangdong, said Wang Zhe, senior economist at Caixin Insight Group, although he warned that the impact from the latest round of outbreaks since late July was likely to hurt August’s PMI readings.

“The economy still faces enormous downward pressure, and we need to ensure business owners remain confident,” Wang said.

Tourism is already taking a hit, as local authorities encourage people to stay put to avoid infection, which will be a blow for industries looking forward to peak summer travel demand.

A sub-index of new business in the Caixin survey stood at 54.5 in July, up from 50.5 the previous month. New export orders contracted again due to the resurgence of COVID-19 cases overseas.

Business confidence picked up, although it was still slightly lower than its long-term average. Service sector employment returned to growth in July but the rate of job creation was only slight as firms looked to control costs.

Caixin’s July composite PMI, which includes both manufacturing and services activity, rose to 53.1 from June’s 50.6.

Meanwhile, China logged a marked drop in service trade deficit in the first half of 2021, data from the Ministry of Commerce showed Tuesday.

Service trade rose by 6.7 percent year on year to around 2.38 trillion yuan (US$367.97 billion) during the period, with exports up by 23.6 percent year on year to approximately 1.13 trillion yuan and imports down by 5 percent to reach around 1.25 trillion yuan.

The deficit of service trade stood at 120.46 billion yuan in the first six months, 281.25 billion yuan less than the same period last year.(SD-Agencies)