China's service sector activity stagnated as the headline HSBC/Markit China Services index for July hit its lowest reading since the series began in November 2005, data company Markit said Tuesday in a statement.
The HSBC/Markit China Services Business Activity Index, which provides a snapshot of operating conditions in the sector, posted at the no-change mark of 50.0 in July.
It was down from 53.1 in June and was the lowest reading in the nearly nine-year history of the series, according to Markit.
The HSBC/Markit China Services Business Activity Index samples over 400 private service sector companies in China.
According to Markit, new order growth at service providers was the weakest in over five-and-a-half years. Backlogs of work at service providers fell at the fastest rate in 20 months.
Service sector companies saw a solid rise in costs, marking the steepest rise since last November. But they cut prices for services for the fourth consecutive month, albeit marginally.
Positive sentiment among Chinese service providers remained historically weak amid reports that an uncertain economic outlook weighed on overall confidence, said the statement.
"The weakness in the headline number likely reflects the impact of the ongoing property slowdown in many cities as property-related activity, such as agencies and residential services, see less business," said HSBC chief China economist Qu Hongbin.
In the coming months, Qu predicted China's service sector to receive support from the recovery in investment.
"Today's data points to the need [for] continued policy support to offset the drag from the property correction and consolidate the economic recovery," he added.
The official index for China's non-manufacturing sector, compiled by the National Bureau of Statistics and the China Federation of Logistics and Purchasing, stood at 54.2 percent in July, down 0.8 percentage points from June.