China’s services sector is running at its fastest pace since June,propelled by an increase in the rate of new orders,but overall optimism in the industry lags historic levels,a survey of purchasing managers showed on Thursday.
The headline business activity index in the HSBC China Services PMI climbed to a four-month high of 54.1 in October,well above September’s 53.0,as new order growth accelerated for a second successive month and the new business component of the PMI also scaled a four-month peak.
Despite the month-on-month improvement,the index remains beneath its long-run series average of 57,according to a statement from data compiler,Markit,although the index extended a solid recovery from August when it struck a record low for the data series of 50.6.
A survey reading of 50 indicates expansion,while below 50 denotes contraction.
Staff numbers in China’s services sector — which accounts for an estimated 45 per cent of the economy — rose for a thirty-third consecutive month,but the rate of job creation was below the long-run average.
Average input costs rose markedly. The rate of inflation was its highest in four months and well above the long-run average,driven by higher labour and purchasing prices,but output charges increased only marginally,given strong competitive pressures,Markit said.
This underscores the delicate policy balance that Beijing is trying to achieve — battling inflation that is running well above the government’s four per cent target,while also attempting to support industries struggling to grow as global economic conditions deteriorate.
The service sector should find additional policy support in the coming year,as the State Council has unveiled selective policy easing measures,namely pilot VAT reform to relieve tax burdens for service sectors,HSBC’s chief China economist Qu Hongbin said in a statement accompanying the survey.