Beijing: China`s services sector grew at its fastest pace this year in April as a sizzling stock market rally helped boost consumer confidence and spending, a private survey showed on Wednesday.
Yet in a sign that China`s economy still faces strong headwinds, the HSBC/Markit China Services Purchasing Managers` Index (PMI) showed final prices of services hit a 15-month low in April as some firms were forced to cut prices to lift sales.
The services PMI rose to a four-month high of 52.9 in April from 52.3 in March, comfortably above the 50-point level that separates expansion from a contraction in activity on a monthly basis.
Some companies attributed part of the pick-up in new business to the strong stock market, which hit a seven-year peak in April, suggesting that the wealth effect had seeped into parts of the world`s second-biggest economy.
But other firms reported greater stress. Final prices charged slipped to 49.2 last month, a low not seen since January last year and pointing to further pressure on profit margins. Companies also pared their business expectations, though the sub-index remained a good way above the 50-point level.
And while employment in the services sector grew modestly in April, HSBC economist Qu Hongbin cautioned against undue optimism, arguing that China`s overall job market may have shrank last month due to factory layoffs.
"More (policy) measures may be required to ensure the economy does not slow further from the 7 percent annual pace of growth registered in the first quarter," Qu said.
Buffeted by a housing slowdown and anaemic growth in exports, manufacturing and investment, China`s economy grew at its weakest pace in six years in the first quarter.
A Reuters poll in April showed most analysts expect the economy to expand 7 percent in 2015, right in line with the government`s growth target, provided authorities further loosen monetary policy to stoke activity.
Analysts expect the central bank to further lower interest rates and banks` reserve requirements this year, despite having done so four times in the five months since November.
The services sector has accounted for the bigger part of China`s economic output for at least two years, with its share rising to 48.2 percent last year, compared with the 42.6 percent contribution from manufacturing and construction.