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China's Service Sector Expands Strongly In August

chinapmi jun05 03sep20 lt

China's services activity expanded strongly in August as businesses continued to recover from the coronavirus pandemic, survey data from IHS Markit showed Thursday.

The Caixin services Purchasing Managers' Index fell marginally to 54.0 from 54.1 in July. However, a score above 50 indicates expansion.

The latest uptick extended the current sequence of growth to four months, signaling that the sector continued to recover from the marked drops in activity earlier in the year following the Covid-19 outbreak.

New orders increased on greater client numbers and the resumption of projects. Higher sales were largely driven by firmer domestic demand.

The sustained increases in activity and sales led firms to expand their workforce numbers for the first time in seven months.

Operating expenses faced by Chinese service providers rose at a quicker rate midway through the third quarter. The rate of input price inflation was the strongest seen since March. Services companies increased their output charges but the rate of inflation was moderate.

Although services companies generally expect business activity to be higher than current levels in one year's time, the overall degree of positive sentiment dipped to a three-month low in August.

The composite output index rose to 55.1 in August from 54.5 in July. The score signaled the second quickest since December 2010.

The uptick was supported by the strongest increase in manufacturing output since January 2011.

"Overall, the recovery of the manufacturing and services sectors from the epidemic remained the main theme of the economy," Wang Zhe, a senior economist at Caixin Insight Group said.

"Improvement in employment in the post-epidemic era requires longer-term market recovery and longer-term stability of business expectations," the economist added. During this process, support from relevant macroeconomic policies is essential.

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