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Growth dips in China services sector, HSBC PMI shows

PUBLISHED : Wednesday, 07 May, 2014, 10:29am
UPDATED : Friday, 09 May, 2014, 7:15pm

Expansion in China's services industry slowed slightly last month, with employment growth slipping to a seven-month low, a private survey showed yesterday, adding to an increasingly cloudy outlook for the world's second-largest economy.

The Markit/HSBC services purchasing managers' index slipped to 51.4 from March's 51.9 but held above the 50 level that separates expansion from contraction.

The survey's found that input prices eased to their weakest in 10 months, and while the sub-indices of new business and outstanding business remained stable, the sub-index of expectations fell to a seven-month low.

The data showed "that the service sector is still a relatively resilient part of the economy, but it is not expanding at a fast enough pace to offset the manufacturing slowdown", said Qu Hongbin, the chief economist for China at HSBC.

"We think that the economy will continue on a modest path of expansion over the next few months."

The expansion, albeit muted, mirrors a similar slow improvement shown in the official services PMI, released on Saturday. That index rose to 54.8 from March's 54.5.

Services made up 46.1 per cent of gross domestic product last year, having overtaken manufacturing as the country's biggest employer in 2011.

The fall in employment growth found by the survey could be a concern, as the government has said job creation is its top priority this year.

The official PMIs are weighted more towards bigger and state-owned enterprises and tend to paint a rosier picture than the HSBC/Markit surveys, which focus more on smaller firms.

China's growth engine has lost steam in the past year, squeezed by lacklustre demand for exports and the government's push to cut its own investment in a bid to reshape the economy.

Markit/HSBC's manufacturing PMI, released on Monday, showed activity in the sector contracted last month for a fourth consecutive month, with the index at 48.1. However the official manufacturing PMI rose to 50.4 from 50.3.

Economic growth slowed to an 18-month low of 7.4 per cent in the first quarter of this year.

The focus will now shift to a raft of economic data for last month, which is expected to show a stabilisation in the economy.

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