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China Services PMI Falls To 53.5 In September - HSBC

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China's services sector continued to expand in September, albeit at a slower pace, the latest survey from HSBC Bank showed on Wednesday with a PMI score of 53.5.

That's down from 54.1 in August, although it remains above the boom-or-bust line of 50 that separates expansion from contraction.

The composite index, which covers both manufacturing and services sectors, came in at 52.3 - expanding for the fifth straight month but down from the 17-month high of 52.8 in August.

"New business and price indices fell. Meanwhile, outstanding business saw a smaller contraction and the employment index improved marginally from the level seen in August. Overall, the services sector held up in September, despite the downward pressure seen in the manufacturing sector," said Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC.

New business intakes continued to increase across both the manufacturing and service sectors in September. However, the rate of new order growth at manufacturing firms was only moderate. Meanwhile, new order books expanded at a solid pace at service sector companies.

Staffing levels rose for the thirteenth successive month at service providers in September, while workforce numbers declined modestly at manufacturers.

Backlogs of work rose for the fourth straight month at manufacturers in September. In contrast, unfinished business declined for a third consecutive month at service sector firms.

Service sector firms in China saw a further rise in average input costs in September, although the rate of inflation was moderate and the weakest since April. Meanwhile, cost burdens faced by manufacturers fell at a solid pace - so input costs declined for the first time in five months at the composite level, though only slightly.

Latest data signaled divergent output price trends across the manufacturing and service sectors, with charges falling markedly at manufacturing firms, while service providers raised their tariffs for the second straight month. That said, the rate of inflation was similar to August and only fractional. At the composite level, output prices fell modestly over the month.

"We think risks to growth in the near term are still on the downside, and warrant accommodative monetary as well as fiscal policies," Hongbin said.

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