China services PMI jumps to 11-month high in June

Activity in China’s services sector jumped in the month of June to reach an 11-month high, according to results released Tuesday by a private survey. This marks divergence from the struggle the country was undergoing to revive manufacturing and re-balance the economy, towards a path of sustainability.

The Caixin Markit services purchasing managers' index (PMI) for June rose to 52.7 from 51.2 in May on a seasonally adjusted basis. Readings above 50 indicate an expansion on a monthly basis, while readings below signal contraction.

However, a composite measure of activity fell to a four- month low, highlighting that a growing services sector may not be able to make up for a prolonged decline in the industrial economy that has pushed China's growth to 25-year lows.

Despite strength in the services sector, however, the Caixin Markit composite PMI covering both manufacturing and service activity fell to 50.3 in June, down from 50.5 in May, remaining just above the neutral mark.

"Service sector growth is now supporting the overall economy, and the expansion for services is coming at a time when the manufacturing index is contracting, suggesting the nation’s economic structure is becoming more balanced," Reuters reported, citing Zhengsheng Zhong, Director, Macroeconomic Analysis, CEBM Group.

Meanwhile, market participants are widely expecting that the April-June quarter's gross domestic product, due to be released on July 15, will remain unchanged. GDP expanded 6.7 percent y/y in the first three months of the year, the slowest pace since the global financial crisis but still in line with Beijing's official 2016 target range of between 6.5 to 7 percent.