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China Economy

China’s services sector grows apace, mirroring rebound in manufacturing

Official non-manufacturing PMI at six-month high of 55.5, raising hopes economy is steadying

PUBLISHED : Tuesday, 03 June, 2014, 10:16am
UPDATED : Monday, 30 May, 2016, 5:01pm

China's services sector grew at its fastest pace in six months last month as new orders rebounded, an official survey showed, reinforcing hopes that the economy may be steadying after a tumultuous few months.

The official non-manufacturing purchasing managers index (PMI) climbed to 55.5 from April's 54.8, the National Bureau of Statistics said. That is well above the 50-point level that separates an expansion from a contraction in activity.

In a sign of buoyancy in the sector, new orders rebounded to an eight-month high of 52.7 from April's 50.8. Business expectations also held their ground at a solid 60.7, compared with April's 61.5.

The pick-up in the services PMI echoes a rebound in the factory sector, which turned in its best performance in four months last month as export orders improved, although activity still contracted, a private survey showed yesterday.

The final reading of the HSBC/Markit PMI for May rose to 49.4 from 48.1 in April, although lower than a preliminary "flash" reading of 49.7.

The final PMI was weaker than the flash reading because of an upward revision of the inventory of finished goods, HSBC said.

The sub-index for new export orders rose to a four-year high of 53.2 from April's 48.9, but the sub-index for new orders barely stopped contracting, suggesting domestic demand remains sluggish despite the improving global demand.

The HSBC/Markit PMI has been below the 50 level that separates growth from contraction since the start of the year.

"The final PMI reading for May confirmed that the economy is stabilising, but it is too early to say that it has bottomed out, particularly in light of a weaker property sector," said Qu Hongbin, chief economist for China at HSBC.

"The lack of sustainable growth momentum warrants stronger policy support. We expect both monetary and fiscal policy to be loosened gradually over the coming months."

The official PMI hit a five-month high of 50.8 in May from April's 50.4, the National Bureau of Statistics said on Sunday, beating market expectations of 50.6.

The official PMI is weighted more towards bigger and state-owned enterprises and tends to paint a rosier picture than the HSBC/Markit survey, which focuses more on smaller private firms.

The HSBC/Markit survey also pointed to weaker employment in the manufacturing sector in May.

Growth in the world's second-largest economy slipped to an 18-month low of 7.4 per cent between January and March.