China's service sector picks up

Oct activity grows at fastest pace in 3 months as PMI rises to 52, mainly from new business

BEIJING • Activity in China's service sector expanded at its fastest pace in three months last month.

This is thanks to stronger new business, a private survey showed yesterday, easing concerns over persistent weakness in the economy as the manufacturing sector falters.

The Caixin/Markit Purchasing Managers' Index (PMI) rose to 52.0 last month from September's 14-month low of 50.5, hitting the highest level since July.

A reading above 50 points signifies growth on a monthly basis, while one that falls below that indicates a contraction.

"This shows that previous stimulus policies have begun to take effect, while the economic structure steadily improved," said chief economist at Caixin Insight Group He Fan. "The economy has started to show signs of stabilising, reducing the need for a further stimulus."

A sub-index measuring new business jumped to 52.9 from September's 50.5, while the employment sub-index also improved to a three-month high.

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The economy has started to show signs of stabilising, reducing the need for a further stimulus.

MR HE FAN, chief economist at Caixin Insight Group, on the rise in the PMI

Still, underscoring an uncertain economic outlook, business expectations moderated to a record low last month.

China's official service survey showed on Sunday that growth in China's service industry cooled last month, expanding at its slowest pace in nearly seven years.

The private survey focuses on small and mid-sized companies, while the official gauge looks more at larger state firms.

Two manufacturing PMIs released earlier showed business conditions in China continuing to cool gradually, moderating fears shared by some global investors of a hard landing for the world's second-largest economy.

Beijing has rolled out a flurry of support steps since last year to avert a sharper slowdown, including slashing interest rates six times since November last year and lowering the amount of cash that banks must hold as reserves four times this year.

But such measures have been slower to take effect than in the past, and some economists still expect Beijing to roll out more support in coming months.

China's economy grew 6.9 per cent between July and September from a year earlier, dipping below 7 per cent for the first time since the global financial crisis, though some market watchers believe real growth rates are much weaker than government figures suggest.

REUTERS

A version of this article appeared in the print edition of The Straits Times on November 05, 2015, with the headline 'China's service sector picks up'. Print Edition | Subscribe