China Services Expansion Cools in New Sign of Economic Weakness

(Bloomberg) — China’s services activity expanded less than expected, a private survey showed, adding to worries over the economy’s health.

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The Caixin China services purchasing managers’ index fell to 51.6 in August, compared with 52.1 in the previous month, according to a statement released jointly by Caixin and S&P Global on Wednesday.

The median forecast of economists surveyed by Bloomberg was 51.8. Any reading above 50 suggests an expansion.

The findings add to a picture of an economy at risk of stalling, with official data published over the weekend showing service industries from restaurants to tourism near contraction during the last month of summer. The sector is at the center of piecemeal government action to revive consumer demand weighed down by a prolonged real estate crisis.

The International Monetary Fund has called services “an underutilized driver” of growth that contributes far less to China’s value-added than the advanced economy average of about 75%.

The non-manufacturing measure of activity in construction and services eked out growth last month thanks to consumer appetite during the summer holiday season, the National Bureau of Statistics said on Saturday. Unlike the official services PMI, the Caixin survey focuses more on smaller private firms.

The outlook for the country’s $17 trillion economy still hinges largely on the prospects for manufacturing and exports even as new hurdles emerge to their expansion. China’s factory activity contracted for a fourth straight month in August, the latest sign the world’s No. 2 economy may struggle to meet this year’s growth target of around 5%.