New businesses seen to benefit from rise in China's service sector activity

The Composite Output Index rose 49.9 to 51.4 signalling a modest rate of expansion.

HSBC also notes at the sector level, manufacturers recorded a marginal drop in output, while service providers noted stronger growth from one month earlier. The latter was highlighted by a rise in the seasonally adjusted HSBC Services Business Activity Index from 53.3 to a six-month high of 54.1 in April. Where a rise in service sector activity was registered, panellists commonly linked growth to higher intakes of new business. Some survey participants also commented on a general improvement in market conditions.

Here's more from HSBC :

April data signalled a further rise in new orders placed at Chinese service providers. Although below the long-run trend for the survey, the rate of new order growth was solid, and the sharpest in ten months. Meanwhile, composite data pointed to the strongest expansion of new business since October 2011.

Despite a further rise in new orders, backlogs of work in the Chinese service sector fell marginally during April. The index measuring trends in outstanding business has now recorded a sub-50 reading in each of the past three months. With manufacturers recording a slight rise in work-in-hand, the rate of backlog accumulation at the composite level was unchanged since March.

Staff numbers in the Chinese service sector rose during April, extending the current period of growth to 39 months. Although modest, the rate of job creation in the sector was the sharpest since November 2011. This was partly offset at the composite level, however, by the sharpest rate of decline in manufacturing employment for 37 months.

Input price inflation in the Chinese service sector accelerated to a strong rate in April. Moreover, the latest rise in average costs was the sharpest since August 2010. This drove cost inflation at the composite level to the strongest in six months.

Service sector companies left their output charges broadly unchanged in April. Some firms mentioned
reducing charges in response to state regulation. This was particularly the case in the Financial Intermediation sector. Meanwhile, panellists that reported a rise in output prices largely linked this to passing higher costs on to clients.

April data showed service sector firms again expressing confidence in the one-year business outlook, with the degree of optimism the strongest in 12 months. Reasons for positive sentiment included expectations of strong new order growth, better economic conditions and, in some cases, business expansion plans.