BEIJING, (Reuters) – China's service sector grew at its fastest clip in three months in September on sentimental demand, a private survey on Monday, but sentiment as a firm started shedding jobs over two years of expansion while rising cost Presses on a profit margins.
FILE PHOTO: A waiter at a newly opened specialist coffee shop at an iced-coffee drink for members of a cupping class in Beijing. May 26, 201
The Caixin / Markit services Purchasing managers' index (PMI) rose to 53.1 in September from 51.5 in August, and remaining above the 50 level that separate growth from contraction.
The faster growth is a welcome signal for a key part of the world's second-largest economy.
An official gauge of the non-manufacturing sector for last month is published on Sept. 30 so pointed to continued expansion, which analysts say what drives driven by a jump in construction in a sign of the government's fiscal easing may be gaining traction.
Monday's survey showed the pick-up came from higher new business orders, as the sub-index rose at its quickest pace in three months with a reading of 52.4, compared to 51.7 in August.
China is counting on services, especially high value-added services in finance and technology, to lessen the economy's traditional reliance on heavy industry and investment. Policymakers also have quickened project approvals.
Strength in the services sector would have been felt by China's manufacturing sector from the impact of U.S. tariffs. Factory activity stalled in September after 15 months of expansion, with export orders falling the fastest in over two years, a separate Caixin survey just over a week ago.
Government statistics show the services sector, accounting for slightly more than half of China's economy in the first half of 2018, grew 7.6 percent in that period from a year earlier, easily outperforming overall GDP growth of 6.8 percent.
Caixin's composite manufacturing and services PMI, released on Monday, rose marginally to 52.1 in September from 52.0 in August.
ABRUPT EMPLOYMENT LOSS
While the uptick in the service activity might have been a relief for Chinese policymakers battling a protracted trade with the United States, an emerging job contraction in the sector may signal emerging stress.
"Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, said in a note accompanying the data release.
The employment sub-index fell to 49 in September, marking its first contraction since July 2016, and the lowest level since March that year, leading to a slight pullback in business expectations for the next 12 months.
China's state planner has said that it is concerned about its job market, while finance minister Liu Kun also said Reuters is highly concerned about potential job losses.
China's State-Led Deleveraging Campaign, as Part of Beijing's Resolute Debt Build-up, has also hit some regional governments and companies' ability to finance new projects and pay off debt interests.
"The deterioration in employment will test policymakers' determination in pressing ahead with reforms," Zhong added.
Service companies may have felt a profit in September as prices charged fell for the first time in 13 months.
Companies reported greater fuel, raw materials and salary costs in the month, the survey showed.
Reporting by Yawen Chen and Joseph Campbell; Editing by Shri Navaratnam