05.12.202308:04:00UTC+00China Service Sector Growth Gains Strength

China's service sector grew at the fastest pace in three months in November as there were upturns in new business as well as business sentiment, survey data from S&P Global showed on Tuesday.

The Caixin services Purchasing Managers' Index, or PMI, rose to 51.5 in November from 50.4 in October. A score above 50.0 indicates expansion in the service sector.

There was a stronger upturn in new business due to the firmer underlying market conditions. Both domestic and overseas demand improved in November. Employment dropped fractionally and firms attributed this fall to restructuring efforts amid the relatively subdued demand conditions.

Sustained caution around hiring contributed to a further upturn in outstanding orders. That said, the rate of backlog accumulation slowed since October.

On the price front, the survey showed that average input prices continued to increase in November. Nonetheless, the rate of cost inflation was the weakest since June 2022.

Consequently, the rate of output price inflation slid to a three-month low and was broadly in line with average.

Further, services companies were optimistic about their one-year outlook as stronger economic conditions helped to raise customer demand.

However, business sentiment remained softer than the series average. The composite output index, that combines performances of manufacturing and services sectors, improved to 51.6 in November from 50.0 in October.

However, the official PMI data released last week suggested that the private sector growth softened further in November.

The composite output index declined to 50.4 in November from 50.7 a month ago. "Overall, the macroeconomy showed signs of a positive recovery, with steady growth in consumer spending, solid progress in industrial production and improved market expectations," Wang Zhe, a senior economist at Caixin Insight Group, said.

However, domestic and external demand face challenges and employment pressures remained relatively high, the economist noted. The foundation for economic recovery should be consolidated further.

". policy measures that focus on the long term and strengthen the foundation of economic growth should be doubled down to cultivate long-lasting market confidence," said Wang.