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Growth in China's services sector hit a five-month high in August underpinned by new ordersand business optimism, a private survey showed on September 3, 2013, adding to views thatthe world's second-largest economy had avoided a sharp slowdown.
The Markit/HSBC Services Purchasing Managers' Index climbed to 52.8 in August afterseasonal adjustments, up from July's 51.3 and the highest since March. The reading was wellabove the 50 level that demarcates an acceleration in activity from a slowdown, although a sub-index for employment shrank.
The outcome was roughly in line with China's official non-manufacturing PMI on September3,2013, which showed the services sector grew steadily in August as domestic demand pickedup. The official survey is weighted more towards bigger and state-owned companies.
Qu Hongbin, an HSBC economist, cited new business growth as the key driver of the index andexpected growth momentum of the services sector to be sustained in future.
"A filter-through impact of VAT reform, combined with a rebound in manufacturing output, isexpected to support service industry growth in the coming months," Qu said.
As recently as a month ago, investors had worried that China's economy was slipping into adeeper-than-expected downturn, especially after its money market was hit by anunprecedented cash crunch in June.
But policymakers have stepped in with a series of measures aimed at stabilizing the economy,including quickening railway investment and public housing construction and introducingpolicies to help smaller companies with financing needs.
Earlier this week, both the official and Markit/HSBC PMI surveys of Chinese manufacturersshowed factory activity accelerated in August.
The services industry is an increasingly important pillar in China's economy, especially as thegovernment seeks to expand domestic consumption to drive growth. It accounted for about 45percent of the economy in 2012 and is the biggest employer in China.
Firms in the survey reported that stronger demand and promotions lifted new orders, whichrebounded to 53.2 in August and marked the fastest growth rate since March, HSBC said.
Companies also expressed an increased level of optimism towards future output, with the sub-index for business expectations improving to a five-month high.
Average input costs also increased modestly and output charges were raised for the first monthin four.
On the downside, employment in the services sector contracted for the first time since April, asservice providers saw their profit margins squeezed.