China’s services sector growth slightly deteriorates in Sep, still shows solid jobs creation

Services sector in China grew at a slightly deteriorating pace during the month of September, although the sector contributed to the fastest creation of jobs in almost seven months, following boost in new business activities, throwing more signs of an economic as well as financial stability in China. This further supports the growing consensus that China's central bank will hold off on further monetary easing such as interest rate cuts through at least the end of the year.

The Caixin/Markit services purchasing managers' index (PMI) dipped fractionally to 52.0 in September on a seasonally adjusted basis from 52.1 in August, but remained well above the 50-mark that separates growth from contraction on a monthly basis. Also, Caixin's composite PMI, covering both the manufacturing and services sectors also continued to show healthy expansion, with a reading of 51.4, also slightly lower than August.

While most measures of activity improved, companies' business expectations were much lower than the previous month, when they hit a six-month high. Further, services companies saw modest growth in new work in September with some firms attributing this to new clients and product developments.

Moreover, employment rose for the first time in three months. The pace of job creation, although moderate, was the fastest since February.

"Overall, the economy continued to grow in September, but the rate of expansion fell two months in a row. Fiscal policy needs to continue to support the economy, because there is insufficient growth momentum on its own," Reuters reported, citing Zhengsheng Zhong, Director, Macroeconomic Analysis, CEBM Group.

Meanwhile, manufacturing surveys also suggested the economy was slowly stabilizing, with Caixin/Markit's showing activity expanded marginally as orders picked up, while an official factory reading stood at 50.4, identical to the previous month, reports confirmed.