- Tommy Xie, an economist at OCBC
Business activity in the Chinese services sector rose at the fastest pace in 11 months in July amid stronger new business, a positive sign at a time when factories of the world's second biggest economy are struggling. The Caixin services PMI surged to 53.8 in July, compared with June's reading of 51.8, and reaching the highest level since August 2014. A sub-index measuring new business increased to 54.0, from 52.2 in June, while the employment sub-index also climbed, indicating increased hiring amid stronger new businesses. Both input prices and selling prices rose in July, indicating a slight pick-up in inflationary pressure. The services sector has made up for the bigger part of China's economic output for at least two years, with its share increasing to 48.2% last year, compared with the 42.6 percent contribution from manufacturing and construction.
The services PMI data marked a sharp contrast with the Caixin China manufacturing PMI for July, which was released earlier in the week and surprised economists to the downside by coming in at 47.8, compared with the preliminary reading of 48.2. The divergent readings on the services and manufacturing sectors will not necessarily keep the mainland from hitting its "around 7%" target for GDP growth this year.
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