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     BEIJING (MNI) - The expansion of the Chinese services sector eased in July,
as new orders and output softened, according to the latest survey of services
sector purchasing managers jointly released by Caixin magazine and Markit.
     The headline index fell to 51.5 in July, the lowest reading since May 2016,
from 51.6 in June. The reading was the same as April's 51.5. 
     Readings above 50 indicate expansion in the services sector, and readings
below 50 indicate contraction. The higher the PMI reading above 50, the faster
the expansion in the sector. 
     The fall in the Caixin index was in line with the increase shown in the
official services PMI jointly released July 31 by the China Federation of
Logistics and Purchasing (CFLP) and the National Bureau of Statistics (NBS). The
CFLP index fell to 54.5 from 54.9 from in June, the 10th consecutive month that
the reading has been above the 54 mark.
     A smaller increase in production was the main cause of the slowdown in the
Caixin services PMI. The output index expanded at the slowest pace since May
2016, and was at the same level as April, according to Caixin. 
     A slower growth in new work also contributed to the fall. New order growth
fell to the weakest level in 16 months, Caixin said, adding that service
providers complained that fewer client numbers had weighed on subdued sales.
     The employment index also continued to soften. "The rate of job creation at
services companies held close to June's 10-month low and remained marginal,"
Caixin noted. "Services companies added to their payroll numbers for the 11th
month running."
     Input prices continued to rise, but at the slowest pace since last June,
according to Caixin. 
     As a result, output prices saw a further marginal increase.  
     The pressure on operating capacity across services companies tightened
further, but the pace was little changed from the previous two months.
     Chinese services firms expressed less confidence in their outlook for
business a year ahead, with the level of positive sentiment dipping to the
weakest since November, Caixin said.
     Caixin's China Composite PMI index, which combines the results of the
separate manufacturing and services surveys, jumped to 51.9 from 51.1 in June,
the highest rate in four months.
     The rise was led up by the strong performance of the manufacturing sector.
The headline manufacturing PMI rose to 51.1 in July from 50.4 in June, the
strongest reading since 51.2 in March, according to data published by Caixin on
Tuesday.
     "China's economic performance in July was stronger than expected, mainly
due to sustained recovery in the manufacturing sector," said Zhong Zhengsheng,
director of macroeconomic analysis at CEBM Group, a subsidiary of Caixin.
"However, downward pressure on the economy likely remains as the index gauging
companies' confidence toward the 12-month business outlook dropped in both the
manufacturing and services industries."
--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com
--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com
[TOPICS: MAQDS$,M$A$$$,M$Q$$$,MT$$$$]

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