Caixin
Mar 03, 2017 09:45 AM
ECONOMY

China’s Service Sector Expansion Eases in February: Caixin Survey

(Beijing) — China’s service sector grew at a slower rate in February than it did the previous month, as increases in the number of new business slowed and there were limited opportunities for firms to raise prices, a survey sponsored by Caixin showed on Friday.

The Caixin China General Services Business Activity Index slipped to 52.6 in February from 53.1 in January and the 17-month high of 53.4 in December, according to the survey.

A reading above 50 indicates expansion, while anything below that points to contraction.

New orders placed with service providers continued to climb last month on improved demand and expansion into new markets, but the growth rate was unchanged from that in January.

The increase in job creation weakened slightly in February from the preceding month, according to the survey, which is based on data compiled from monthly replies to questionnaires sent to purchasing executives at more than 400 companies.

Inflation pressures softened in February with service companies registering the lowest increase in their costs since November. Competitive market pressures also undermined the firms’ pricing power, leading prices charged for services to barely change from January.

The Caixin China General Manufacturing Purchasing Managers’ Index (PMI), published on Wednesday, rose to 51.7 last month from 51.0 in January.

As a result, the Caixin China Composite Output Index, which covers both manufacturing and services, rebounded to 52.6 in February from 52.2 in the previous month.

The figures suggest that China’s economic growth “continued to recover” in February, said Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group, a subsidiary of Caixin Insight Group.

But he also warned that headwinds could take hold starting in the April-to-June period.

“The Chinese economy is expected to maintain the growth momentum in the first quarter of this year. But signs of weakening may emerge from the second quarter,” he said.

The Chinese economy grew by a stronger-than-expected 6.8% in the last three months of 2016, picking up from a gain of 6.7% in the January-September period.

The recovery looked to have gained traction as the latest available official data showed that exports and inflation both improved further this year.

However, some analysts have voiced concern over the sustainability of the stronger growth. They point to uncertainties, such as expected corrections in the property market, which saw breakneck price surges last year that prompted local authorities to introduce tightening measures starting in September. They also note financial risks posed by the country’s stubbornly high debt levels.

The government on Wednesday published its non-manufacturing business activity index, which fell to 54.2 last month from 54.6 in January.

Contact reporter Fran Wang (fangwang@caixin.com)

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