GROWTH in China’s services sector slowed for a second straight month in January, a traditionally busy sales season, hitting a three-month low as companies cut prices and new orders dipped, a private sector survey showed yesterday.

The Caixin/Markit services purchasing managers’ index (PMI) slowed to 51.8 last month from 52.5 in December, but was still higher than an eight-month low hit in October.

The slowdown in growth suggests the services sector, which accounts for more than half of the economy, faces persistent challenges despite a flurry of stimulus and a Sino-U.S. “Phase One” trade deal. The reading is also unlikely to reflect the early impact of the coronavirus crisis that flared in late January.

“China’s economic recovery was not strong enough due to limited improvement in demand, and some companies didn’t replenish inventories,” said Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group.

The cooling trend in the private sector survey, which focuses more on small, export-oriented companies, contrasts with the official nonmanufacturing PMI, which showed the sector’s activity quickened in January.

Services companies reported a smaller rise in the volume of new work in January and continued to face higher fuel and labor costs. Demand softened at home, while new orders from overseas picked up modestly from the previous month.

The pace of job creation almost stalled, with the employment sub-index hitting the lowest level in 16 months. Meanwhile, firms had to lower their selling prices for the second time, squeezing companies’ profit margins.

But their expectations regarding the one-year outlook for business activity improved notably in the month.(SD-Agencies)