China's Services Activity Climbed to Five-Month High in November, Caixin Survey Shows
Zhang Yushuo
/SOURCE : yicai
China's Services Activity Climbed to Five-Month High in November, Caixin Survey Shows

(Yicai Global) Dec. 5 -- China's services sector saw business activity jump to a five-month high in November thanks to buoyant demand at home, according to the findings of a private survey.

The Caixin China General Services Business Activity Index gained 3 points to 53.8, indicating increasing activity, with firms polled citing an increase in orders. A reading over 50 denotes the dividing line between expansion and contraction.

The resurgent service sector coupled with a marginal increase in the Caixin China General Manufacturing Purchasing Managers' Index to send the Caixin China Composite Output Index to 51.9 last month from 50.5 in October, which was a 28-month low. 

New orders gained slightly despite October's stagnation to hit a five-month high last month, though still below the historical average. Orders increased due to improved underlying demand, many respondents said, pointing to greater client numbers and last month's China International Import Expo in Shanghai. The manufacturing and service sectors both logged new order growth in the period.

Overseas demand differed between the two sectors. The growth rate for services rose slightly for two straight months, while that of manufacturing further declined, causing overall new export orders to drop for the eighth month in a row.

Service companies took on workers for a second month since they expect demand to pick up in coming months. The rate of job creation is still lower than the long-term average and failed to offset a further modest reduction in industry employment, pushing overall staff numbers down for a sixth straight month.

Service sector costs continued to rise significantly last month, with the same increase as in October. This was mainly due to rising fuel and raw material prices. Manufacturing costs also continued to gain, but at the weakest pace in seven months.

Competitive Edge

Despite soaring costs, service companies only charged slightly more, while ex-factory prices in manufacturing fell a little to keep a competitive edge.

Companies in the two sectors are generally rosy about production and operations in the next year. Business confidence among manufacturers rebounded last month from October's 11-month low and remained low while that of service providers dipped to a nadir since July over market competition and sluggish demand jitters, while business confidence was in general weak.

The Caixin China Composite Output Index rebounded greatly in November, suggesting a clear easing of downward pressure on the economy, mainly powered by improved demand, said Zhong Zhengsheng, chairman and chief economist at Caixin Insights. Employment remained stable, inflationary pressures further eased, but business confidence continued to ebb, Zhong added.

Caixin's PMI reading is different from that of the National Bureau of Statistics, which earlier announced a Services Business Activity Index of 50 with a monthly drop of 0.3 percent and a composite PMI down by 0.3 percent to 52.8.

Editor: Ben Armour

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Keywords: PMI , service