(Yicai) Aug. 3 -- Activity in China’s services sector increased for the seventh month in a row in July, indicating a modest recovery and resilience among businesses, according to the results of a widely watched private survey.

The Caixin services purchasing managers’ index came in at 54.1 last month, up from 53.9 in June, which had fallen from 57.1 in May, data released today by financial media group Caixin showed. A reading above 50 indicates expansion.

After two months of expansion, the Caixin manufacturing PMI dipped into contraction territory, standing at 49.2 in July, lower than June’s 50.5 and 50.9 in May. That dragged down the composite output sub-index to the lowest since February at 51.9, having fallen from 52.5.

Caixin’s services PMI highlights different trends from the figures published by the National Bureau of Statistics, but their composite PMI measures are consistent. The official services PMI stood at 51.5 last month, down from 52.8 in June, while the composite PMI output index at 51.1 compared to 52.3 a month ago.

The official gauges are compiled by the government and survey 3,200 firms, most state-owned, whereas the Caixin PMIs track 650 businesses that are generally smaller and privately owned.

The divergence between the service sector and the manufacturing sector was a standout feature last month, and the cool economic climate and heavy downward pressure on the economy were still indisputable facts, said Wang Zhe, senior economist at Caixin Think Tank.

At the policy level, ensuring employment, steadying expectations, and boosting incomes are still the top priorities, Wang added, noting that monetary policy has a limited effect on the supply side, and active demand-based fiscal policy should become a priority.

Supply and demand in the services sector continued to expand last month, with the services business activity sub-index rising a little and the new orders sub-index rebounding into the expansion range. But the pace of external demand slowed significantly, with the export orders sub-index coming in just above 50, the lowest in seven months.

Some of the firms that took part in Caixin’s survey noted that uncertain overseas economic prospects had constrained exports in the service industry.

The services employment sub-index continued to rise for the sixth straight month, climbing to the highest level since March, mainly due to the boom in supply and demand, with service sector firms hiring more to expand output. But it was still not enough to complete orders on hand, with the work backlog still worsening.

Service sector firms remain optimistic about the outlook, but the July business expectations sub-index fell to the lowest in eight months and below a long-term average in the expansion range. Some companies expect the domestic and overseas economies to improve in the coming year, while others are concerned about the sluggish global economy.

Editor: Martin Kadiev