Services Sector Grows At Fastest Pace In Three Years

- Jan 11, 2018 -

China’s service activity expanded at its quickest pace in more than three years in December, a Caixin survey showed Thursday, a further sign of resilience in the world’s second-largest economy.

The Caixin China General Services Business Activity Index rose to 53.9 in December, up from 51.9 in the previous month and the highest reading since August 2014. A number above 50 indicates an expansion in activity, while a figure below that points to a contraction.

The services sector includes finance, real estate services, marketing, transportation and retailing. Also known as the tertiary sector, it accounted for 54.1% of the country’s economic output in the first half of last year, up from 51.6% in 2016 and 50.2% in 2015, according to the National Bureau of Statistics. The services sector is more labor-intensive than manufacturing, and policymakers are counting on it to create jobs.

Services providers last month enjoyed the strongest upturn in new orders since May 2015, with around 14% of monitored firms reporting an increase. The rising business requirements led the companies to continue to expand their payrolls in December, although the rate of job creation was moderate.

The increase in average input prices for the services sector matched the rate seen in March last year and was the fastest in nearly four years, as costs of raw materials, transportation and salaries went up. Service providers continued to raise prices in an attempt to pass on a greater share of their costs to customers, though at a rate similar to those seen in the previous two months.

The Caixin China General Manufacturing Purchasing Managers’ Index (PMI), which was published on Tuesday, came in at 51.5 for December, the highest in four months.

The solid expansions in manufacturing and services pushed the Caixin China Composite Output Index, which covers both manufacturers and service providers, to increase to a one-year high of 53 in December.

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