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May 5, 2017

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Service PMI sees slower increase

CHINA’S service industries expanded at the slowest pace in 11 months, adding to signs of downward pressure on the economy, a private report showed yesterday.

The Caixin China General Services Purchasing Managers’ Index, a gauge of operating conditions in mostly private service firms, dipped for the fourth consecutive month to 51.5 in April from March’s 52.2, according to the survey conducted by financial information service provider Markit and sponsored by Caixin Media. A reading above 50 indicates expansion, while a reading below 50 represents contraction.

The sub-indexes of input costs and output prices dipped, while the amount of new business placed with service providers grew more quickly in April.

Services companies continued to hire more people at the start of the second quarter, but the rate of job creation eased to the weakest in 2017 so far, the survey found.

The lower Caixin service PMI followed a drop in its manufacturing PMI, which fell to a seven-month low of 50.3 last month from 51.2 in March.

As a result, the Caixin China Composite Output Index, which covers both manufacturing and services, declined from 52.1 in the previous month to 51.2 in April, the lowest in the past 10 months.

“Growth in both manufacturing and services decelerated in April, reflecting a clear slowdown in the expansion of the Chinese economy,” said Zhong Zhengsheng, director of macro-economic analysis at CEBM Group, a subsidiary of Caixin Insight Group.

“A turning point in growth appeared to have emerged at the beginning of the second quarter.”

The decline echoed with earlier official indicators which showed slower expansion across manufacturing and service industries.

China’s official manufacturing PMI, leaning toward larger and state-owned companies, fell below market expectations to 51.2 last month.

The official service PMI came in at 54 in April, down from 55.1 in March, according to the National Bureau of Statistics.

The service sector has played an increasingly important role in the Chinese economy, as it creates nearly half of the country’s jobs, and is critical to rebalance the economy from labor-intensive manufacturing to service economy and consumer spending.

In the first quarter, the service sector took up 56.5 percent of the overall economy.

However, service activity growth has softened in each month of 2017 so far, as tepid growth in the manufacturing sector weighed on manufacturing-related service industries.


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