(Yicai Global) Oct. 8 -- A widely watched private survey showed an expansion in China’s service sector activity last month following a contraction in August as the impact of the pandemic abated and the supply, demand and employment environments improved.

The Caixin purchasing managers’ index for services stood at 53.4 for September, up from 46.7 in August, data released by financial media group Caixin showed today. A mark above 50 indicates expansion.

Meanwhile, the Caixin manufacturing PMI rose to 50 in September from 49.2 the previous month, per data released on Sept. 30. Gains in the two PMIs drove the composite output index up 4.2 percentage points to 51.4 last month, indicating renewed expansion in China's business activity.

China’s official manufacturing PMI fell 0.5 point from August to 49.6 last month, dropping below 50 for the first time since March 2020, according to a survey by the National Bureau of Statistics. That was at odds with Caixin’s survey.

The two institutions, however, saw eye to eye on the composite PMI and services PMI. According to the NBS, China’s service sector business activity index recovered 7.2 points from August to 52.4, and the composite PMI output index rallied above the 50 mark to 51.7, up 2.8 points from August.

Last month, recovery in supply and demand in the services sector pushed the production index and new order index above 50, Caixin’s data showed. According to the respondents, the eased pandemic situation, a recovering market and the increase in the number of customers have led to a return to sales growth.

The index for new export orders, however, was at a seven-month low as a worsening pandemic overseas weakened exports.

Inflation pressure mounted with a continuing rise in service sector costs. The index for service sector input stood above 50 in September, with the sales price index also in expansionary territory on rising labor costs, transport fees and raw material prices.

“In the coming months, the government should focus on improving epidemic prevention and control and alleviating supply-side pressure,” said Wang Zhe, senior economist at Caixin Insight Group.

“It should also find a balance between multiple objectives, such as promoting employment, maintaining raw material prices, ensuring stable and orderly supplies, and meeting targets for controlling energy consumption,” he said.

Editor: Peter Thomas