Solid expansion of service output seen in April

The Chinese service sector grew at its fastest rate in six months in April, pushed by an increase in the number of new businesses in existence, a report from HSBC Holdings Plc said.

The Business Activity Index, which represents the service Purchasing Managers’ Index and shows operational conditions in non-manufacturing industries, rose to 54.1 last month from 53.3 in March, HSBC said on Friday. A score above 50 indicates an increase in services output and below indicates a decrease.

The reading was the highest recorded since October 2011. Many survey participants said they saw a general improvement in market conditions in April.

The improvement in the service business has warmed the employment market, suggests a sub-index that rose to a five-month high of 51.6 last month. Meanwhile, a sub-index gauging business expectations also climbed to a record for the year that month, reaching 65.4, compared with 64.5 in March, according to the HSBC report.

On Thursday, the National Bureau of Statistics and China Federation of Logistics and Purchasing released the official non-manufacturing Purchasing Managers’ Index for last month. It showed a fall to 56.1, 1.9 percentage points lower than what it had been in March.

The service industry, along with seeing an increase in new orders, is growing at a sound pace, said Qu Hongbin, chief economist in China with the HSBC.

“Meanwhile the rebound in the manufacturing business can support our expectations that the country’s economic growth may speed up steadily in the second quarter this year,” Qu said.

He forecast that the government will continue to ease monetary policy in the future to boost the real economy while inflationary pressures are kept under control.