China's service sector growth stabilized at a relatively low level in July, while a faster contraction in manufacturing fueled a second consecutive fall in the country's overall private sector output, a survey by Markit Economics and HSBC revealed Monday.
The headline business activity index was at 51.3 in July, unchanged from June. Readings above 50 indicates expansion of the sector.
At the same time, the composite output index, that gauges private sector activity combining both manufacturing and services, fell to 49.5 in July from 49.8 in June.
New business fell at the composite level for the third month in a row during July as a modest increase in services new business failed to offset a marked reduction in manufacturing new orders.
Private sector staff levels declined for the fourth month in a row in July, the strongest reduction since February 2009. This was mainly led by job cuts in manufacturing. At the same time, employment in the service sector increased slightly.
"Without a sustained improvement of demand, services growth is likely to remain lackluster, putting downside pressures to employment growth," said Hongbin Qu, chief economist at HSBC.
The survey also revealed that at the composite level, input costs fell for the fourth month in a row. While manufacturers noted a marked fall in operating costs, service providers reported a modest increase. Output charges were cut in both manufacturing and service sectors in July.
Meanwhile, the official survey of the non-manufacturing sector, conducted by the China Federation of Logistics and Purchasing (CFLP) and the National Bureau of Statistics, revealed on Saturday that growth in services activity strengthened in July. The official non-manufacturing PMI posted 54.1 in July, up from 53.9 in June. New orders stabilized with the index scoring 50.
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