Caixin
Mar 05, 2018 09:44 AM
ECONOMY

Services Sector Activity Eases From Seven-Year High

China’s service activity was strong in February, but fell back from a seven-year high in the previous month as a second straight monthly drop in new work was too heavy to offset growth in sales.

The Caixin China General Services Business Activity Index came in at 54.2 last month, down from 54.7 in January, which was the highest reading since October 2010. A number above 50 indicates an expansion in activity, while a figure below that points to a contraction.

“A drop in the new business index was most obvious, reflecting a cooling of strong demand for the services industry,” said Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group, a subsidiary of Caixin Insight Group. “Under those conditions, the input prices index declined from the previous month’s high, but the index for prices charged unexpectedly moved up, indicating the profitability of (the) services business was moving in a positive direction.”

Last week, a separate but related index for the manufacturing sector showed China’s manufacturing activity expanded for a ninth straight month in February, as total new work expanded and outstanding work levels rose amid business optimism that reached its highest level in nearly a year. As a result, the Caixin China General Manufacturing Purchasing Managers’ Index (PMI) rose to 51.6 in February from 51.5 the previous month, marking the highest reading since August.

In the services sector, a number of companies commented that greater efforts to secure new clients and new projects had lifted their sales in February, according to the General Services Business Activity Index’s compiler.

Services providers showed sustained job creation in February, as rising business requirements led such companies to hire additional workers. The level of jobs in progress but not completed remained broadly unchanged for the month, according to the latest survey.

“Service providers saw a solid rise in cost burdens despite the pace of inflation easing from January’s 69-month record,” the index’s compiler wrote. “Although cost burdens continued to rise strongly, services companies raised their charges at a modest pace that was only slightly stronger than that recorded in January.”

The services sector includes finance, real estate services, marketing, transportation and retailing. Also known as the tertiary sector, it accounted for 51.6% of the country’s economic output last year, the same as in 2016 and up from 50.2% in 2015, according to the National Bureau of Statistics (NBS).

The services sector is more labor-intensive than manufacturing, and policymakers are counting on it to create jobs. It accounted for 58.8% of growth in gross domestic product in 2017, dwarfing the 36.3% contribution of the industrial sector, NBS figures showed.

Contact reporter Yang Ge (geyang@caixin.com)

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