The HSBC/Markit Purchasing Managers' Index (PMI) survey for the services sector in China showed signs of improvement. In July, the index for the services industry was at 51.3. The figure showed just a flicker of expansion from a twenty-month low when the index stood at 51.1 in April. In reading a PMI, a figure above 50 shows that business has grown compared to that of the previous month while a reading below 50 is evidence of contraction.
The growth in the services industry was fueled by new orders as businesses showed signs of resilience despite the slowdown in the economy, Reuters reported. Decreased demand for exports and factory production had weighed down the growth of the world's second largest economy. The fact that investors aren't as active as before in putting their money in China also affected growth.
HSBC economist Qu Hongbin said that some stability is seen in China's service sector. However, he warns, "But profit margins continue to be squeezed. Without a sustained improvement in demand, services growth is likely to remain lackluster, putting downside pressures to employment growth."
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