×

Caixin February services PMI falls to 51.2 from January's 52.4

Getty Images

China's services industry—the biggest contributor to gross domestic product—remained in expansion mode last month but the pace of growth slowed, according to a private poll released on Wednesday.

The Caixin Purchasing Managers' Index (PMI) dropped to 51.2 in February after hitting a six-month high of 52.4 in January.

A reading above 50 indicates activity is growing, while one below that level suggests a contraction.

Asian equity markets were mostly higher following the data, with China's benchmark Shanghai Composite rising as much as 0.7 percent. The Australian dollar meanwhile, which is especially sensitive to Chinese data, was little changed around 73 US cents.

Declining growth in new orders contributed to weaker expansion in both business activity and employment, Caixin said in a statement, which also noted higher average input costs, weak job creation and rising layoffs.

For activity to really pick up in the sector, the government must take action, warned He Fan, Caixin's chief economist.

"While implementing measures to stabilize economic growth, the government needs to push forward reform on the supply side in the services sector to release its potential," He said in a statement.

The Caixin gauge, which measures mid-size and small firms, wasn't too far off from the government's survey that covers larger businesses.

China's official non-manufacturing Purchasing Managers' Index (PMI) stood at 52.7 in February, down from the previous month's reading of 53.5, data out on Tuesday showed.

The services sector, which follows consumer industries such as real estate, retail and leisure, accounts for half of national gross domestic product (GDP) and has become a key barometer of consumption, widely seen as one of the sole bright spots in a stalling economy.

"The infrastructure and export-oriented parts of China's economy are under stress, but some of the consumption-oriented sectors are performing well, particularly high-end services such as tutoring and tourism," said a Wells Fargo report from last week.

In contrast, China's manufacturing businesses are suffering, with both the official and Caixin PMIs well below the 50 level in February, due to overcapacity and weak demand.

—Follow CNBC International on Twitter and Facebook.