(Yicai) July 3 -- Activity in China’s service sector in June slumped to the lowest level since November last year, as the country’s economic recovery stumbles due to sluggish demand and a drop in market confidence, according to the findings of a widely watched private survey.

The Caixin purchasing managers’ index for services stood at 51.2 last month, compared with 54 in May, according to data released by financial media group Caixin today. A reading above 50 indicates expansion and one below contraction.

The data is roughly in line with that published by the National Bureau of Statistics earlier. The official services PMI slumped 0.3 percentage point to 50.2.

The country’s factory activity, though, climbed 0.1 percentage point month on month to 51.8, the highest reading in three years, according to Caixin.

The Caixin composite PMI, which combines services and manufacturing, dipped 1.3 percentage points to 52.8, dragged down by the big slowdown in the services sector.

The sub-indexes showed that supply and demand in the services sector continued to expand in June but at a slower pace. The new order sub-index slumped to a four-month low but stayed within positive territory. A slowdown in overseas demand meant that the new export order sub-index dropped slightly from May’s one-year high.

The employment sub-index fell into contraction territory with companies continuing to reduce their headcount and more employees choosing to leave voluntarily.

The business expectation sub-index tumbled for the second straight month to the lowest since April 2020 but remained in positive territory. Companies are concerned that the economy could weaken further this year, which will affect their performance, according to the survey.

The manufacturing sector performed better than the service sector in June, and supply and demand expanded, said Wang Zhe, senior economist at Caixin’s think tank. However, employment contracted and companies are not optimistic about the future.

Lack of market confidence and effective demand remain the biggest challenges for the economy today, Wang said. Looking ahead, the country should hike policy support for the economy and bring previous policies into full play. It should also pay special attention to boosting optimism by promoting fiscal and taxation reforms among other measures, he added.

Editor: Kim Taylor