Chinese economy

China Economy

Growth in China service sector eases as business sentiment weakens, HSBC PMI shows

PUBLISHED : Thursday, 05 June, 2014, 10:16am
UPDATED : Monday, 30 May, 2016, 5:01pm

Growth in the mainland's services sector retreated last month to a four-month low, a private survey showed, contrasting with other data that had raised hopes that the world's second-largest economy may have steadied.

The services purchasing managers' index compiled by HSBC/Markit slipped to 50.7 from April's 51.4 but remained above the 50-point level demarcating a monthly growth in activity from a contraction.

In a sign that some companies remained cautious about their prospects, business expectations fell to 58.1, a one-year low and the second-worst reading ever recorded since collection of the data began in November 2005.

The findings buck the trend seen in other mainland PMI data in recent days, which suggested the economy may be stabilising after a weak start to the year, and raise the question of whether Beijing needs to do more to put a floor beneath growth.

"Growth momentum remains slow and private sector sentiment is weak," HSBC economist Qu Hongbin said in reference to the "slight disappointment" in the latest PMI poll.

"We think policymakers should continue to ease monetary and fiscal policies in coming months to help support growth."

Three separate PMI polls released in the past week all showed the mainland's factory and services sectors enjoying their best performances in four or five months in May as foreign and domestic demand improved.

Taken together, the PMI releases signal that the country's economic outlook is uncertain.

Businesses appear to agree.

Firms surveyed in the PMI indicated they were not as confident as before. And the guardedness had led companies to delay hiring new workers, HSBC/Markit said, citing anecdotal evidence.