China services PMI at highest in 6 months

More evidence of pickup in the economy, of which it accounts for 45 per cent

PUBLISHED : Thursday, 03 October, 2013, 12:22pm
UPDATED : Thursday, 03 October, 2013, 12:23pm

Activity in China’s services sector expanded at the fastest pace in six months in September as demand grew, cementing a modest pickup in the world’s second-largest economy.

The official purchasing managers index (PMI) for the non-manufacturing sector rose to 55.4 – the highest reading since March – from 53.9 in August, the National Bureau of Statistics (NBS) said on Thursday.

A reading above 50 indicates activity in the sector is accelerating, while one below 50 indicates it is slowing. The sub-index measuring new orders, from both home and abroad, rose to 53.4 from 50.9 in August, while input prices and services charges eased, the survey showed.

The services industry, which has so far weathered the global slowdown much better than the factory sector, is an increasingly important pillar in China’s economy, especially as the government seeks to expand domestic consumption to drive growth.

The services sector accounted for about 45 per cent of the economy last year and is the biggest employer in China.

China has unveiled plans to open up the largely sheltered sector to foreign competition and to test bold financial reforms in a new free-trade zone in Shanghai.

The survey followed a pair of PMIs that showed slower than expected expansion in activity in China’s factory sector in September, with the official manufacturing PMI edging up to 51.1 from 51 in August and the final HSBC PMI inching up to 50.2 from August’s 50.1.

Beijing has stepped up efforts to head off a sharp economic slowdown by quickening railway investment and public housing construction and introducing measures to help smaller companies.

Recent economic data has shown some of the impact of those policies, with factory output in August hitting a 17-month high and retail sales growing at their fastest pace this year.

Most analysts have pencilled in a slight rebound of economic activity over the July-September quarter, although the outlook from here remains uncertain given global headwinds.

Peng Wensheng, chief economist at China International Capital Corp, expects the country’s annual economic growth to have quickened to 7.8 per cent in the third quarter from 7.5 per cent in the previous quarter.

“We don’t expect any big changes in economic policies, and monetary policy is likely to remain neutral, given steady economic growth and benign inflation,” he said in a research note.

Beijing has set a 7.5 per cent growth target for the economy this year, a goal officials say would be met, but which would still mark the slowest pace of expansion in 23 years.

A private survey on China’s services sector for September will be published on October 8. The Markit/HSBC services PMI hit a five-month high of 52.8 in August.