China Service Sector Growth Softens

(RTTNews) - The Chinese service sector continued to expand in January, but the pace of expansion moderated on slowing new order growth, survey results from S&P Global showed on Monday.

The Caixin services Purchasing Managers' Index, or PMI, unexpectedly fell to 52.7 in January from a five-month high of 52.9 in the previous month. The score was seen at 53.0.

The index has remained in the expansionary territory for 13 straight months, indicating a sustained recovery in the services sector.

There was another sharp increase in the overall new business driven by firmer underlying demand conditions and new customers.

Export business also increased further but the pace of growth eased fractionally.

Employment advanced for the second straight month with firms linking the increase to efforts to expand capacity amid higher sales. That said, the rate of job creation remained marginal.

Backlogs of work increased in January as a sustained rise in new business placed greater pressure on operating capacities. On the price front, the PMI survey showed that cost inflation increased only slightly in January. Meanwhile, prices charged by service providers declined for the first time since April 2022.

Business sentiment remained strong underpinned by upbeat growth projections, increased customer numbers and planned company expansion. However, the degree of optimism fell to a three-month low. The overall private sector that combines performances of manufacturing and services also continued to expand in January.

The composite output index posted 52.5 but down from December's seven-month high of 52.6. The Caixin factory PMI was steady at 50.8 in January.

Earlier, the official PMI survey data showed that the private sector expanded at a faster pace in January.

The manufacturing PMI registered 49.2, up from 49.0 in December. Likewise, the non-manufacturing PMI advanced to 50.7 from 50.4 in the previous month.

In January, the People's Bank of China announced a reduction in the reserve requirement ratio by 50 basis points in order to instill confidence in the economic recovery.

The RRR cut took effect on February 5. The move is expected to inject around CNY 1 trillion of long-term liquidity.

The central bank reportedly conducted CNY 100 billion of 14-day reverse repo operations on Monday. The rate on reverse repo was 1.95 percent.

Last week, the International Monetary Fund raised China's growth forecast for this year to 4.6 percent and retained the projection for next year at 4.1 percent.

The upgrade reflected the carryover from stronger-than-expected growth in 2023 and the increased government spending on capacity building against natural disasters, the IMF said.