A robust expansion of China’s services industries has offset weaker growth in the manufacturing sector to further stabilize economic growth momentum in November, according to economic indicators.
The Caixin China General Services Business Activity Index rose to 51.9 in November from 51.2 in October, the fastest expansion in three months, said a report that was released on Dec 5.
The booming services sector has supported a rebound of a composite output index, which covers both manufacturing and service companies, to 51.6 from October’s 16-month low of 51, the report said.
On Dec 1, a separate survey showed that the Caixin China General Manufacturing Purchasing Managers’ Index dropped to 50.8 last month compared with 51 in October, because of a slower growth in new business orders along with companies’ lower confidence in the business outlook.
For the indicators, a reading above 50 means expansion in business activities, while any reading below that means a contraction.
“The Caixin PMI readings in November showed the economy has maintained stability and there was no imminent risk of a significant decline in its growth rate,” said Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group, a subsidiary of Caixin Insight Group.
For the services sector, new business expanded at a rapid pace while input costs and prices charged continued to rise, said the economist.
“But we should be cautious because the economy may come under rising inflationary pressure at the start of next year due to continued price increases,” he suggested.
The inflation pressure was shown by the three-month fastest growth in new orders received by services providers and the highest level of employment subindex since August. Meanwhile, the increase in input costs faced by service providers was the highest since May and the subindex of prices charged was the highest since July 2015, according to the report.
With a contribution of more than a half on the country’s economic output, the services sector has became the major driving force of growth as the economic development model is shifting away from depending much on investment and exports.
The official data released by the National Bureau of Statistics last week said that the country’s non-manufacturing PMI slightly climbed to 54.8 in November, up from 54.3 in October.
“The moderate rebound of the official PMI suggests growth momentum was stable in November,” said Zhao Yang, Nomura chief China economist, despite an expectation that China’s GDP growth would be slightly down to 6.6 percent in the fourth quarter compared with 6.8 percent during the July to September period.