China's Service Sector Expands At Fastest Pace In 3 Months

China PMI 110415

China's services activity grew at a pace that was the most pronounced since July suggesting that policy measures have begun to stimulate the economy, a survey from Markit revealed Wednesday.

The Caixin/Markit Purchasing Managers' Index for services rose to 52 in October from a 14-month low of 50.5 in September. Nonetheless, the reading suggests modest growth that was slower than the historical average.

The reading shows that previous stimulus policies have begun to take effect, while the economic structure steadily improved, He Fan, chief economist at Caixin Insight Group, said. "The economy has started to show signs of stabilizing, reducing the need for a further stimulus."

The official PMI data released over the weekend showed that the non-manufacturing PMI slid to 53.1 in October from 53.4 in September.

The composite PMI that covers manufacturing and services signaled a broad stabilization of business activity in October, Markit said. A stronger increase in service sector business activity was offset by a further decline in manufacturing output.

The composite indicator climbed to 49.9 in October from September's 80-month low of 48. It is only fractionally below the neutral level of 50.

Service sector companies reported further rise in total new business. The rate of order growth picked up from September's recent low. Overall new business rose for the first time in three months.

Service providers continued to add to their payroll numbers in October. As employment growth at service providers was not sufficient to offset a further fall in manufacturing staff numbers, headcounts at the private sector continued to fall in October.

The report also signaled reduced amount of unfinished work across China's service sector, but the rate of depletion was only slight. Lower than expected sales had contributed to falling backlogs.

Service providers reduced their selling prices for the second month in a row, albeit only fractionally. Manufacturing selling prices also decreased in October.

Falling charges in the service sector were recorded despite a further increase in cost burdens. A sharp fall in input prices at manufacturing companies meant that composite input prices continued to drop.

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