China services PMI indicates slower pace of expansion in the sector in July

Markit/Caixin's survey revealed that China's services sector in July demonstrated the slowest increase in activity since May 2016. The Caixin/Markit services purchasing managers' index (PMI) came in at 51.5 last month on a seasonally adjusted basis, down from 51.6 in June. Economist forecast the indicator to increase to 51.9. The 50 mark divides contraction and expansion.

According to the survey, new order growth slowed edged down to the least marked for 16 months, and the level of service providers' optimism was the lowest since last November. At the same time, the rate of job creation at services companies held close to June's ten-month low and remained marginal. Average input costs continued to grow across China's service sector in July, though the rate of inflation eased since June and was the weakest seen for nearly a year.

Dr. Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, noted: "The Caixin China General Services Business Activity Index fell 0.1 point from the previous month to 51.5 in July, on par with April's reading that marked the weakest pace of expansion since May 2016. The index of new business edged down and the input costs index fell to its lowest level for nearly a year, while prices charged rose marginally. The Composite Output Index came in at 51.9, up 0.8 points from a month ago and the highest figure since March. China's economic performance in July was stronger than expected, mainly due to sustained recovery in the manufacturing sector. However, downward pressure on the economy likely remains as the index gauging companies' confidence towards the 12-month business outlook dropped in both the manufacturing and services industries."