Private sector activity in China expanded for the second straight month in April driven by services, while output broadly stagnated at manufacturers.
The Caixin composite output index fell to 50.8 in April from 51.3 in March, survey data published by Markit showed Thursday. A score above 50 indicates expansion but the latest reading signals a slowdown in growth.
The services Purchasing Managers' Index came in at 51.8, down from 52.2 a month ago. This suggested that the pace of service sector expansion remained modest overall and slower than the historical series average.
Despite slower growth, service providers said new orders grew at the strongest pace in three months, citing improved underlying demand and new product launches. At composite level, new business increase moderately for the second consecutive month.
Services companies raised their staff numbers on the moderate rebound in new order growth, while manufacturers reduced staffing. Consequently, private sector employment dropped further.
The amount of outstanding business at Chinese service providers increased for the first time in 2016 so far in April.
Average input costs continued its upward trend at service providers, with the inflation rate picking up slightly. Manufacturers registered the fastest rise in cost burdens since the start of 2013. As a result, composite input costs increased at the quickest pace since February 2013.
Sustained cost inflation contributed to a renewed rise in prices charged by service providers in April. At the same time, manufacturing companies raised their charges solidly. At the composite level, average tariffs rose at the quickest rate since October 2011.
Further, the survey showed that overall business sentiment remained unchanged from March's three-month low in April.
"The economy still faces relatively strong downward pressure," He Fan, chief economist at Caixin Insight Group, said. The government needs to keep implementing moderate stimulus to prevent a hard landing of the economy, the economist added.
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