(Yicai) Sept. 4 -- Activity in China’s service sector increased at the second-slowest pace this year in August, putting the expansion into its 20th consecutive month, as new order growth eased and employment fell a little, according to a closely watched private gauge.

The Caixin services purchasing managers' index came in at 51.6 last month, down from 52.1 in July, data released by financial media group Caixin showed today. A reading above 50 indicates expansion.

In comparison, the non-manufacturing PMI for August published by the National Bureau of Statistics on Aug. 31, edged up to 50.3 from 50.2. That figure also stayed in expansion territory for the 20th straight month. The Caixin PMI polls smaller and private businesses, providing a different perspective from the official PMI, which focuses on large, state-owned enterprises.

New orders growth slowed while continuing to expand, and new export orders rebounded somewhat, with firms reporting more interest from overseas clients in areas such as tourism.

Employment fell slightly after increasing in July, tipping into contraction territory due to staff resignations and corporate layoffs. The work backlog swelled a little because of higher new business volume and fewer workers.

Costs climbed due to higher raw material prices, wages, and transport expenses, with input costs reaching the highest since July 2022. Despite this, businesses were forced to cut prices to spur sales amid a soft market and tougher competition.

Output costs contracted for the first time in seven months, hitting the lowest point since May 2022, leading to squeezed profit margins.

Business sentiment rose to a three-month high, with companies generally hopeful around market conditions and the effectiveness of business expansion plans.

The Caixin manufacturing PMI for August, released on Sept. 2, rose to 50.4 from 49.8, while the official PMI shrank for the fourth month in a row to 49.1, the lowest since February. The Caixin composite PMI was unchanged at 51.2, the lowest since last October.

While the manufacturing and service sectors remained in expansion territory, rising costs and falling prices put further pressure on earnings, according to Wang Zhe, senior economist at Caixin Insight Group. 

Prominent issues persist, including insufficient effective demand at home, uncertainties in external demand, and weak optimism among market entities, Wang said. There is still room and urgency for fiscal and monetary policies to increase support and promote the implementation of previous policies, he added.

Editor: Martin Kadiev