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China's Private Sector Expands At Slightly Faster Pace

03Mar 2017

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China's private sector expanded at a slightly faster pace in February supported by manufacturing activity amid softening services growth, survey results from IHS Markit showed Friday.

The Caixin China composite output index rose to 52.6 in February from January's four-month low of 52.2. A score above 50 indicates expansion in the sector.

The uptick in the headline index was supported by faster growth in manufacturing production in February. At the same time, services activity expanded at the slowest pace in four months.

The seasonally adjusted services Purchasing Managers' Index came in at 52.6 versus 53.1 in January.

The Chinese economy is expected to maintain the growth momentum in the first quarter of this year, Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group said. "But signs of weakening may emerge from the second quarter."

Growth in composite new business was the second-fastest since March 2013. New orders placed with manufacturers helped to lift total new work, while the upturn in services orders remained unchanged.

On the other hand, services companies continued to raise payroll in February. Meanwhile, manufacturing companies registered a marginal drop in workforce numbers. Sustained growth in service sector staffing levels underpinned the first increase in composite employment since May 2015.

On the price front, the survey showed that average input costs continued to rise sharply at manufacturers in February but the rate of inflation eased to a four-month low. Meanwhile, service providers posted only a moderate rise in cost burdens that was the slowest since last November.

Overall, composite data signaled a further marked increase in average input prices, albeit one that was the weakest in four months.

Composite output charges climbed at a softer pace in February. Manufacturers raised their selling prices at the weakest pace in five months.

At the same time, competitive market pressures limited the overall pricing power of services companies, which led prices charged for services to be little-changed from the previous month.

Optimism towards future activity growth remained strongly positive in February. At the composite level, sentiment towards the business outlook edged up to its highest since May 2015.

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