BEIJING (Reuters) - China’s services sector activity expanded at its fastest pace in over three years in December on solid growth in new business, with the outlook improving to a six-month high, a private sector survey showed on Thursday.
The upbeat findings broadly echo those of an official gauge of the non-manufacturing sector last week that showed activity accelerated at a faster rate in December than the previous month, reinforcing the view that an expected slowdown in the broader economy would be gradual.
The Caixin/Markit services purchasing managers’ index (PMI) rose to 53.9 in December, from 51.9 in November and the highest reading since August 2014.
A reading above 50 indicates growth, and a reading below signals contraction on a monthly basis.
New business increased at the fastest pace since May 2015, with survey respondents reporting sales supported by strong underlying client demand and new projects.
China’s leaders are counting on growth in services and consumption to rebalance economic expansion from its heavy reliance on investment and exports.
The services sector accounts for over half of the economy, with rising wages giving Chinese consumers more spending power at home and abroad.
The survey also showed input price inflation for services firms in China in December matched March’s reading at 53.8, higher at 51.7 in November.
Companies were able to pass through higher input costs to clients, though at a slightly slower pace than in November.
A similar private sector survey of manufacturers on Tuesday also suggested input costs remained high, fueled by China’s government’s tougher pollution measures in a battle against thick winter smog.
That report showed the manufacturing sector expanded at the fastest pace in four months as firms cranked up production to meet a surge in new orders.
Driven by strong readings in both the services and manufacturing sectors, the headline Caixin China Composite PMI rose to 53.0 in December, compared to 51.6 in November and the highest in a year.
“Expansions in total new orders and new export business supported optimism among manufacturers and service providers towards the business outlook for next year,” Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, said in a note with the report.
“Although China’s economic growth remains under downward pressure, it is still resilient. However, special attention should be paid to whether future policies will become tighter than expected.”
The world’s second-biggest economy has defied market expectations with growth of 6.9 percent in the first nine months of 2017, supported by a construction boom and robust exports.
Sources have told Reuters that Chinese leaders are likely to stick with a growth target of around 6.5 percent for 2018, the same as last year, even as they ratchet up efforts to prevent a destabilising build-up of debt.
Reporting by Elias Glenn and Lusha Zhang; Editing by Sam Holmes