Activity in China’s services sector softened in July as growth in new business weakened and hiring was sluggish, a Caixin survey showed on Thursday, paring optimism about the short-term outlook after a gauge of manufacturing rose to a four-month high.
The Caixin China General Services Business Activity Index fell to 51.5 from 51.6 in June. Although that’s still well above the “50” line that divides expansion from contraction, it was the same reading as April, which was the lowest this year and the weakest since May 2016.
The subindex of new orders fell for a second month, edging down to 51.8 after a large drop to 51.9 in June from 53.5 the previous month. July’s number was the lowest reading since February 2016.
Despite the marginal decline in the services index, the Caixin China Composite Output Index, which covers manufacturing and services companies, hit a fourth-month high of 51.9 for July, bolstered by a pickup in factory activity as the Caixin China General Manufacturing Purchasing Managers’ Index (PMI) rose to 51.1 from 50.4 in June.
Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group, a subsidiary of Caixin Insight Group, said that growth momentum in the world’s second-largest economy was “stronger than expected” at the start of the third quarter “mainly due to sustained recovery in the manufacturing sector.”
However, “downward pressure on the economy likely remains as the index gauging companies’ confidence toward the 12-month business outlook dropped in both the manufacturing and services industries,” he said.