Services activity expands at quickest rate in years

Firmer client demand gave a boost to China's services activity which expanded in January at the quickest pace since May 2012, a private report showed today.

The Caixin China General Service PMI rose to 54.7 at the beginning of the year from 53.9 in December, according to the survey conducted by financial information service provider Markit and sponsored by Caixin Media.

A reading above 50 signals growth while one below 50 means contraction.

The report said service providers noted a further increase in new business during the opening month of the year amid reports of firmer client demand.

New order growth accelerated to a 32-month record across the service sector, and headcount continued to rise for the 17th consecutive month.

Released last week, the Caixin manufacturing PMI for January remained flat at 51.5, as in December.

The Caixin Composite PMI, which covers both manufacturing and services, rose to a seven-year high of 53.7 from December’s 53, to indicate a solid pace of expansion.

“Caixin PMI readings in January showed that the Chinese economy had a good start to 2018,” said Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group. “Looking forward, we should watch for stability of demand in the manufacturing industry and the impact of growing costs on the profitability of service providers.”

He added that the input prices sub-index hit the highest since April 2012, due to the impact of rising labor costs and crude oil prices.

Meanwhile, the official general PMI, released last week for the first time to track both the manufacturing and services sectors, was flat at 54.6. As data showed, the December reading would have been the same.

The manufacturing PMI dipped to 51.3 in January, the lowest since May last year, while the non-manufacturing PMI rose for the third consecutive month to 55.3.

The official PMI survey covers thousands of large and small companies, while the Caixin service PMI measures several hundred.

The services sector contributed to more than half of China’s gross domestic product in recent years as the country is in the midst of transforming its economy from being investment-driven to consumption-driven.