A worker stokes the furnace at a Sanming Steel (Group) Co Ltd factory in Sanming, East China's Fujian province. [YANG ENUO/FOR CHINA DAILY]

BEIJING - China's service sector activity dropped in January, an official monthly survey showed on Sunday.

The purchasing managers' index (PMI) for the non-manufacturing sector retreated to 53.7 in January from 54.1 in December, according to a report released jointly by the National Bureau of Statistics and the China Federation of Logistics and Purchasing.

A reading above 50 indicates expansion, while a reading below 50 represents contraction.

PMI signals industrial stabilization, analysts say

By Agencies

A gauge of manufacturing activity recovered lost ground in January, suggesting stimulus measures have helped stabilize the world's second-largest economy.

The preliminary Purchasing Managers' Index from HSBC Holdings Plc and Markit Economics was 49.8, exceeding the median estimate of 49.5 in a Bloomberg survey and up from December's 49.6.

Numbers below 50 indicate contraction.

Gross domestic product expanded 7.4 percent in 2014, the slowest full-year pace in 24 years, and provinces are lowering targets for this year's expansion. Along with data this week showing industrial output and retail sales improved in December, the first reading of the economy's momentum in January may alleviate concerns of a deeper downturn.

"The gain likely reflects a positive impact from monetary easing," said Dariusz Kowalczyk, an economist at Credit Agricole CIB in Hong Kong. "The manufacturing PMI reading suggests that industrial output will continue to expand at a solid pace in coming months."