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HSBC China services PMI recovers to 54.3 after one-year low

The HSBC services PMI did reflect a slight reduction in the sub-index. ? Reuters pic

BEIJING, Oct 8 ? China?s services sector rebounded in September after its growth hit a one-year low in August, according to a private sector survey today that follows last week?s much more gloomy official assessment.

The HSBC services sector Purchasing Managers? Index rose to 54.3 in September from 52.0 in August, rebounding to its highest level since May thanks to an uptick in the new business sub-index to 54.0 ? also the highest level in four months.

The sunny results are in marked contrast to an official non-manufacturing PMI released on October 3, which showed activity in September slowing to the weakest level since November 2010. The official survey, published by the National Bureau of Statistics, tends to reflect larger state-owned firms, and the two do not necessarily move in tandem.

Today?s survey also contrasts with both the HSBC and the official PMI ones of China?s vast manufacturing sector, which indicate that China is headed for a seventh straight quarter of slowing growth.

?This is likely an indication of a gradual improvement of domestic economic conditions due to the earlier easing measures and the stronger consumption demand in the run-up to the Golden Week holiday,? said Hongbin Qu, HSBC?s chief economist for China.

?While this helped to cushion the ongoing slowdown of manufacturing sectors, a meaningful turnaround in domestic demand requires additional easing efforts.?

The week-long National Day holiday at the beginning of October saw hundreds of millions of Chinese hit the roads and shopping malls, straining capacity at tourist destinations and crowding trains and airports.

This year, the holiday coincided with the Mid-Autumn Festival, when families and business contacts treat each other to restaurant meals, mooncakes and gifts.

HSBC?s ?prices charged? sub-index rose above 50 ? the line that separates expansion from contraction ? for the first time since March. The rise could reflect the holiday as well as reflecting an increase in inflation after a summer trough.

Weak growth

Analysts expect this year to be China?s weakest full year of growth since 1999 at just 7.7 per cent, according a Reuters poll that forecasts annual growth of 7.4 per cent in Q3, down from Q2?s 7.6 per cent.

Two cuts to interest rates, the easing of bank reserve requirements that freed about 1.2 trillion yuan (RM583 billion) for lending and the approval of infrastructure projects worth more than US$150 billion (RM460 billion) have so far failed to arrest the decline in China?s overall economic growth pace.

Analysts have had to repeatedly push back their expectations for when growth might begin to accelerate again. Beijing has resolutely kept a grip on the vital real estate sector and - contrary to the hopes of some ? has refused to launch a major stimulus program.

But there are signs that the real estate sector ? the main driver of wealth for China?s prosperous city dwellers in the past 15 years ? is bottoming out, wrote analysts Stephen Green and Lan Shen of Standard Chartered in a report before today?s PMI data was released.

They pointed to falling apartment inventories and greater activity in land markets.

Local governments, which rely on land sales for revenue, moved to loosen curbs this summer but were slapped down by Beijing. The central government?s stance could change after a new generation of leaders is appointed by the Communist Party in November, some analysts believe.

However, consumers may turn more cautious as the slowdown in the manufacturing sector feeds through to the urban services sector, as implied by the official non-manufacturing PMI results for September, the Standard Chartered report noted.

The HSBC services PMI did reflect a slight reduction in the sub-index that tracks employment, although Markit Economics, which compiles the index, noted that employment grew at its second fastest pace in the past 10 months, thanks to the rise in new orders. ?? Reuters

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Source: http://feedproxy.google.com/~r/tmi/news/allnews/~3/C9ah_J3Y5CQ/story01.htm

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