• Thu
  • Dec 18, 2014
  • Updated: 1:00pm
BusinessEconomy
ECONOMY

China non-factory PMI falls to 53.4, latest sign of slowing economic growth

PUBLISHED : Monday, 03 February, 2014, 10:03am
UPDATED : Tuesday, 04 February, 2014, 5:45am

Expansion in the mainland's non-manufacturing sector eased to a five-year low last month as growth in new orders and prices slowed, official data showed yesterday, adding to worries about the risk of a hard landing for the economy.

The official Purchasing Managers' Index (PMI) for the non-manufacturing sector fell to 53.4 in January, down from 54.6 in December. It was the lowest reading since 2008 at the height of the global financial crisis. The new orders sub-index dipped to 50.9 from December's 51 while service charges slipped to 50.1 from 52. The input price sub-index fell to 54.5 from December's 56.9, showing that production costs are rising at a slower pace.

A reading above 50 indicates expansion, while one below 50 shows contraction in business activities. The China Federation of Logistics and Purchasing compiles the index for the National Bureau of Statistics, based on a survey of about 1,200 firms in 27 industries, including construction, transport and telecommunications. Shrinking demand in the services market needed to be closely watched, it said.

"With the gradual restructuring of our economy, we need to rely more on the services industry to drive domestic consumption. That means we need to do more to improve the consumption environment," the group said.

Economists from Societe Generale, in a report to clients, said: "Although China is not in a similar situation as many emerging market countries in focus, the risk of a hard landing of the Chinese economy is not negligible."

The reading followed Saturday's official announcement that the manufacturing PMI, a key measure of economic activity on the mainland, fell to a six-month low of 50.5 last month as output and new orders slowed.

A rise in new orders in the construction sector for the third consecutive month gave the federation some hope that investment will continue to support the overall economy this year.

"The outstanding orders and the inventories sub-indices [for the construction sector] surged last month from a month earlier, indicating strong market demand, which will hopefully drive growth after the [Lunar New Year] festival," the federation said.

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