China's service sector growth at 17-month high in Dec

05 January 2017

Growth in China's service sector accelerated to a 17-month high in December, a private survey showed, adding to views that the world's second-largest economy is entering the new year with stronger momentum.

The strong pick-up mirrored improvements in manufacturing surveys earlier this week, as market watchers debate whether China's leaders will settle for a more modest growth target this year in order to focus on more pressing issues such as an explosive growth in debt.

The services PMI rose to 53.4 in December on a seasonally adjusted basis from 53.1 in November, the Markit/Caixin services purchasing managers' index (PMI) showed.

The December reading was the highest since July 2015, and well above the 50-mark that demarcates expansion in activity from contraction on a monthly basis.

New business for service firms also rose at the fastest pace in 17 months, while business expectations were at a 4-month high, though an employment sub-index remained stubbornly weak and input prices rose the fastest in nearly two years.

Companies surveyed said that higher raw material prices were the biggest factor in the price spike, but strong competition meant they weren't able to pass along higher costs to customers, pointing to pressure on profit margins. An index of prices charged held basically stable at 50.5 in December.

Caixin's composite PMI covering both the manufacturing and service sectors matched a near 4-year high of 53.5 in December from the previous month's 52.9, pointing to solid and more balanced growth for the economy overall.

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