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China's Service Sector Growth Slows In December

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China's service sector growth slowed in December to the weakest level since August 2011 as new work inflow weakened, results of a survey by Markit Economics and HSBC showed Monday.

The headline services business activity index came in at 50.9 in December, down from 52.5 in November. An index reading above 50 indicates expansion while a reading below 50 suggests contraction.

The latest outcome was largely consistent with the results of a survey released by the China Federation of Logistics and Purchasing and the National Bureau of Statistics last week that showed sharp slowdown in China's non-manufacturing sector growth.

The HSBC composite output index, that measures the performance of both manufacturing and services sectors combined, fell to 51.2 in December from November's eight-month high reading of 52.3. The moderation was influenced mostly by weaker rates of output and new order growth.

Service providers signaled a modest rate of new order growth in December, that was the weakest in six months.

Services firms reported an increase in payroll numbers for the fourth month in a row. Moreover, it was the strongest expansion of workforce numbers in the service sector since June, Markit said.

However, staffing levels were broadly unchanged at the composite level, as manufacturers cut jobs for a second month in a row.

"Despite the moderation of the headline China Services PMI index, which reflected slower new business growth, labor market conditions improved for the fourth month in a row," said Hongbin Qu, chief economist at HSBC. "We expect the steady expansion of manufacturing sectors to lend support to service sector growth," the economist noted.

Inflationary pressures remained moderate overall. Average input costs increased across both the manufacturing and service sectors in December. That said, the overall rate of inflation was modest and the weakest in five months.

Factory gate prices increased slightly at the composite level as service providers raised their tariffs for a fifth consecutive month. In contrast, manufacturers cut their selling prices in December.

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