China's services sector had its worst month on record in February as new orders plummeted to their lowest level since the global financial crisis, a business survey showed on Wednesday, with economists urging swift support to avoid mass bankruptcies.
The Caixin/Markit services purchasing managers' index (PMI) almost halved last month to just 26.5 from 51.8 in January. It was the first drop below the 50-point margin that separates growth from contraction on a monthly basis for the first time since the survey began almost 15 years ago in late 2005.
The sharp correction suggests more urgent action is needed to support the sector, which includes many small retailers that are vulnerable to the coronavirus crisis that flared in late January.
Business activity almost ground to a halt as tens of millions were forced to stay at home amid strict travel restrictions while many restaurants, malls, and movie theatres remained closed, even as some provinces lifted curbs.
"Stagnating consumption amid the coronavirus epidemic has had a great impact on the service sector," Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, wrote in a note accompanying the Caixin PMI release.
The slump in the private sector survey, which focuses more on small, export-oriented companies, echoed an official survey last week, which also showed the activity falling at a record pace.
Beijing needs a robust services sector to cushion a prolonged slowdown in manufacturing and investment and create jobs for workers laid off in other areas.
President Xi Jinping recently affirmed the country's determination to meet unspecified pre-set economic targets this year but analysts at Nomura say high frequency data suggests output in the first quarter could slump further.
While new confirmed virus cases have fallen notably in China, they continue to rise rapidly overseas.
"Although policies have been introduced to provide tax and financing support for industries and small businesses heavily impacted by the epidemic, service companies were still concerned about uncertainties resulting from the epidemic," CEBM Group's Zhong said.
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