Services growth adds to signs of China pickup

PUBLISHED : Friday, 04 October, 2013, 12:00am
UPDATED : Friday, 04 October, 2013, 3:04am

Business activity in the mainland's services sector expanded at the fastest pace in six months last month 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 said yesterday.

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, increased to 53.4 from 50.9, while input prices and services charges eased.

The services industry, which has so far weathered the global slowdown much better than the factory sector, is an increasingly important pillar of the mainland economy.

Services accounted for about 45 per cent of the economy last year and were the biggest employer.

The mainland has unveiled plans to open up its services sector to foreign competition and test bold financial reforms in the new Shanghai free-trade zone.

The survey followed a pair of PMIs that showed slower-than-expected expansion in activity in the factory sector last month, with the official manufacturing PMI edging up to 51.1 from 51 in August, while the final HSBC PMI inched up to 50.2 from 50.1.

Beijing has stepped up efforts to head off a sharp slowdown in the economy 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 expect economic activity rebounded slightly in the third quarter of the year, although the fourth-quarter outlook remains uncertain, given global headwinds.

Peng Wensheng, chief economist at China International Capital Corp, said he expected the mainland's annual growth had quickened to 7.8 per cent in the third quarter from 7.5 per cent in the second.

"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 note.