China's services performance still in good shape, despite slowest growth in a year

China's services industries expanded in July at the slowest pace in more than a year, indicating possible downward pressure on the economy, a private report showed today.
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People line in front of a shop in a shopping mall in Ningbo, Zhejiang Province, on July 28. 

China's services industries expanded in July at the slowest pace in more than a year, indicating possible downward pressure on the economy, a private report showed today.

The Caixin China General Services Purchasing Managers' Index, a gauge of operating conditions in service companies, fell to 51.5 in July from June's 51.6, according to the survey conducted by financial information service provider Markit and sponsored by Caixin Media.

The reading was on par with that of April this year, both months the slowest since May 2016.

New business expanded at the slowest rate in 16 months, while business activity grew at the joint-weakest rate for over a year, the survey said. 

At the same time companies raised their staff numbers only slightly, and confidence towards the 12-month business outlook dipped to its lowest level in eight months.

Released on Monday, the Caixin manufacturing PMI rose to a 4-month high of 51.1 from June's 50.4.

“China’s economic performance in July was stronger than expected, mainly due to sustained recovery in the manufacturing sector,” said Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group. “However, downward pressure on the economy likely remains as the index gauging companies’ confidence towards the 12-month business outlook dropped in both the manufacturing and services industries.”

China's official manufacturing PMI, leaning towards larger and state-owned companies, came in at 51.4 in July, down from 51.7 in June, said the National Bureau of Statistics.

Economists attributed the decline largely to hot weather and flooding, and said a positive economic outlook remained unchanged.

The official data also showed China's non-manufacturing sector expanding at a slower pace in July, with the non-manufacturing PMI moderating to 54.5 from June's 54.9.

The NBS said a contraction of activity in road transport, real estate and residential services overshadowed faster expansion in postal services, broadcasting and Internet sectors.

The official non-manufacturing PMI survey covers around 4,000 service providers, while the Caixin services PMI covers 400, resulting in divergence of the data.


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