China Caixin service PMI falls to 21 month low

BEIJING - China's service sector growth slowed in September, as a private survey showed Monday that an index for the sector fell to the lowest in 21 months.

The Cain General Services Purchasing Managers Index (PHI) slipped to 50.6 in September from 52.7 in August, according to the survey conducted by financial information service provider Markit and sponsored by Caixin Media Co Ltd. A reading above 50 indicates expansion, below 50 shows contraction.

The reading was the lowest recorded by the survey since June. As a result, the Caixin China Composite Output Index, which covers manufacturing and services companies, fell to 51.4 last month from 52.4 in August, also a three-month low.

The Caixin survey showed new orders rose more slowly in September than in August, which contributed to the weaker pace of hiring - payroll numbers expanded only marginally in September.

The rise in input prices in the service sector accelerated for the second month in a row, the survey showed, but it has been far milder than in manufacturing sector, where costs increased at the fastest rate in nine months in September due to higher raw material prices.

The difference between the readings of the Caixin indices and official PMI released by the National Bureau of Statistics is partly due to the types of companies included in the surveys.

The official survey samples 4,000 relatively large non-manufacturing companies, while the Caixin survey has a smaller sample size of around 400 companies and mainly focuses on small and medium-sized firms.

The official manufacturing PMI rose to 52.4 in September, the highest since April 2012, as growth in new orders reached its highest level in more than five years.

The official non-manufacturing PMI, covering the service industry and the construction sector, rose to 55.4 in September, the highest reading since May 2014, on a strong increase in building activity as the industry enters its busy season.

As a major part of the non-manufacturing sector, the service industry's business activity index rose from 52.6 in August to 54.4 in September, according to the NBS.

The service sector -- which includes finance, real estate services and marketing, transport and retail -- has become an increasingly important part of the Chinese economy, as the country tries to shift the economy towards a growth model that draws strength from consumption, services, and innovation.

The sector accounted for more than half of the Chinese economy last year.