China services activity growth reaches 4-month high in October, led by faster rise in new orders

the growth of services activity in China reached a 4-month high during the period of October, led by a faster rise in the country’s incoming new orders, which led companies to raise their workforce numbers for the second successive month.

China’s seasonally adjusted headline Business Activity Index rose from 52.0 in September to 52.4 in October. Although this signaled a modest upturn in activity levels, it was the strongest expansion seen since June. Moreover, the index reading was higher than the average for 2016 so far at 52.0. Confidence towards the year-ahead meanwhile improved to its second-highest in eight months. Cost pressures remained relatively weak, with only a modest rise in input costs, while output charges were broadly unchanged.

Increased business activity was driven by greater amounts of new business at the start of the fourth quarter. As was the case with activity, the rate of growth quickened from September to a four-month high. Also, the country’s services sector witnessed a rise in the rate of employment during the period, extending for two consecutive months.

However, the amount of backlogged work increased for the first time in five months, despite an additional hiring of workers. Meanwhile, the rate of job creation, though modest overall, was the strongest seen since the start of 2016. Higher workforce numbers were generally linked by respondents to planned company expansions and expectations of further increases in activity.