Introduction: China’s service sector accelerates, but Delta’s concerns persist
Good morning and welcome to our continued coverage of the world economy, financial markets, the eurozone and business.
Overnight data from China showed that the country’s service sector accelerated in July, reaching its highest level since May, although the spread of the Delta coronavirus variant in the country threatens the recovery.
The Caixin / Markit services purchasing managers index (PMI) rose to 54.9 in July, down from 50.3 the previous month. Any reading above 50 represents monthly growth rather than contraction.
The survey, which tends to focus on smaller companies in China’s coastal regions, contrasted with official data that had shown a slight slowdown in Chinese services data in July.
The service sector in the world’s second-largest economy has not recovered from the pandemic as quickly as its manufacturing sector, but domestic consumption has rebounded, which has helped.
However, a recent surge in coronavirus infections and the spread of the Delta variant remain a dark cloud on the horizon.
This is the opinion of Michael Hewson, Chief Market Analyst at CMC Markets UK:
Concern about rising infection rates in Asia, and especially China, appears to be causing anxiety because the recovery story in that part of the world is about to become the weakest link in the global recovery story. Not only are we hearing about more cases in China, but we’re also getting an acceleration of cases in Indonesia and Thailand as the virus haunts parts of the world economy with low vaccination rates.
The spread of the Delta variant in several Chinese cities is already affecting the national tourism industry, as local authorities are asking people not to travel to reduce infections.
Will China set the pace for the rest of the world? A day of services PMI data is approaching, starting with the Eurozone and the UK later this morning, and followed by the US.
Analysts appear to have fewer concerns about European economies for the time being, thanks to higher vaccination rates in the region.
In Europe, equity markets appear set to open positively, after the region-wide Stoxx 600 and London’s FTSE 250 hit record highs yesterday.
- 9:00 a.m. M. BST: July Eurozone Services PMI
- 9.30 a.m. M. BST: July UK Services PMI
- 12 noon BST: Weekly US mortgage approvals.
- 1.15pm BST: ADP survey of US corporate payroll
- 3pm BST: July US Services PMI
George is Digismak’s reported cum editor with 13 years of experience in Journalism