China introduces services index to reflect changing economy

Bloomberg

China introduced a new indicator for the services sector to better track the vast range of activity from movies to restaurants that now account for more than half of the economy.
The services output index rose 8.2 percent in January and February from a year earlier on growth in technology, transportation, and deliveries, the National Bureau of the Statistics said in the first release of the index. It plans to update the measure each month.
The NBS said the index tracks the output of services, also known as the tertiary sector, without deducting the input costs, which means it’s different to a quarterly report released with the government’s data on gross domestic product. The increased focus on services underscores the sector’s increasing importance as China transitions away from old smokestack industry drivers and export-led growth.
Services accounted for 51.6 percent of economic output last year. The category’s 8.3 percent growth in the fourth quarter helped offset slower expansions in manufacturing and agriculture and contributed to the world’s second-largest economy posting its first acceleration in two years.
The index is crafted to reflect short-term changes in the service sector, said Sheng Laiyun, a National Bureau of Statistics spokesman at a press conference in Beijing. China’s economy is rapidly restructuring from over-reliance on industry to services, and the days of “reading the face of industries” to make decisions have been replaced by services, he said.
The gauge reflects both the volume of businesses and values such as operating revenue, NBS said in a statement. It’s adjusted for prices, and raw data come both from the statistical system and government ministries. The bureau said it currently releases only the general gauge, while sub-indexes by sector will be rolled out “at the proper time.”
“It’s a change made to adapt to the evolving structure of the economy,” said Gao Yuwei, a researcher at the Bank of China Ltd.’s Institute of International Finance in Beijing. He said that with a comprehensive indicator, the government can better gauge the growth of services output and improve policy making.
Gao said the new index still needs improvement because it doesn’t account for input costs and that it’s difficult to collect data from service companies because they’re more scattered and fast-changing.
The statistics bureau says compilation of the new gauge is “a process of exploration and continuous improvement” as technically it’s difficult to gather, Sheng said. Only a handful of countries such as Britain, Sweden and South Korea publish such indexes, and even the US, with a developed statistics system, doesn’t release a monthly indicator, Sheng said.