Findings of survey by financial information service provider Markit

IFM Correspondent

November 3, 2016: China’s services sector grew at the strongest pace in four months up to October as new business picked up, encouraging companies to hire more workers, a private survey showed.

The Caixin China General Services PMI (Purchasing Managers’ Index) came in at 52.4 in October, firming from 52 in September, according to the survey conducted by financial information service provider Markit. A reading above the 50 mark suggests expansion in activity on a monthly basis while a reading below 50 suggests contraction.

For service providers, the new orders segment in October grew at a moderate rate, but the demand for manufactured goods increased markedly, leading to the fastest increase in total new orders for both sectors combined since November 2014.

Service companies grew exponentially, and some firms also experienced backlog due to high demand and capacity constraints. Many firms were required to hire more employees to keep up with new orders. Firms that hired workers said that they are expanding and expecting orders to continue growing in the future.

However, the service companies reported that they had to maintain same selling prices or increase them by a small margin due to excessive competition in the service industry.

October’s business activity growth was ‘mainly due to a faster increase in manufacturing output’, said Zhong Zhengsheng, director of Macroeconomic Analysis at CEBM Group, a subsidiary of Caixin Insight Group.

He explained that it would be possible to sustain stability in the fourth quarter if supporting policies are maintained and not relaxed.

There is a general opinion among service providers that business activity will flourish in the coming year.