More Policy Measures Implemented as Service Sector Remained Resilient
The country’s service sector has grown its fastest pace in the past three months as new orders have remained strong which is an encouraging sign of strength even when the manufacturing activity has slowed down and property market loosens. The activity in the service sector contrasted sharply with the surveys done last week has shown Chinese factories are struggling by the end of 2014 showing s further loss in the economic momentum.
The findings were able to reinforced expectations that there will be stimulus to be added, either in the form of liquidity injections by the Central Bank with interest rates cuts or reductions from reserve banks that encourages them to lend. Even when the traditional industrial sector is still under pressure policy loosening is still necessary. New moves from the central bank are showing that they actually keeping s strong loosening policy stance that is said to lift growth even when they don’t send a strong signal.
The labor market is also buoyant as the employment sub index has hit a 18 month high as more companies are expanding which suggests that last year the market can tolerate a slower economic growth as long as the labor market remains healthy. Although service firms were not so optimistic on the outlook, the sub index for business expectations dipped to its lowest level since August 2014 as a lot of firms stated that the increase in competition dampened their pricing power.
As the service sector continues to hold up against the manufacturing downturn and provide counter weight to the downward pressure in the economy, they believe that there will be sufficient demand in the overall economy and more policy easing will be warranted in the following months.