Weak China HSBC services PMI hits hopes

Nov 05 2012, 14:35 IST
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SummaryChina HSBC services PMI slips to 53.5 - official services PMI rises to 55.5 from 2-yr low

With leadership change slated at the helm of Communist party, China is getting more woe via economy.

A private survey of China's growing services sector slipped in October, with weaker-than-expected new orders injecting a note of caution after three previous PMI surveys for October showed the world's second largest economy regaining momentum.

The HSBC Purchasing Managers Index for China's services sector released on Monday showed the index slipped to 53.5 in October from September's four-month high of 54.3, as higher costs and greater competition squeezed margins.

In India, a decline the HSBC PMI services sector index for October suggested a slowdown in Asia's third largest economy had not yet run its course, as weakness in the United States and Europe hurt orders and forced firms to hire fewer workers.

In China and India, the index remained above the 50-point level that indicates accelerating growth.

China's services industry, which covers everything from banks, restaurants to Internet firms, has weathered the global slowdown much better than the factory sector. But the services sector is underdeveloped, accounting for just 43 percent of GDP, compared with over 70 percent in Western economies.

The HSBC results contrast with an official non-manufacturing PMI released by the National Bureau of Statistics on Saturday, which rebounded to 55.5 in October from a nearly two-year low of 53.7 in September, reflecting strength in the construction sector. The HSBC PMI does not include construction.

Similarly, manufacturing sector PMIs released on Nov. 1 by both the statistics bureau and HSBC showed signs the economy began to perk up in October.

Despite the moderation of services activity growth, the Chinese economy is gradually bottoming out as the filtering-through of earlier easing policy is boosting domestic demand, Hongbin Qu, HSBC's chief economist for China, wrote in a note accompanying the report.

We expect the continuation of policy easing to sustain the recovery in manufacturing sector in the coming months, which should lend additional support to growth of services sectors and consumer spending.

China's annual GDP growth is expected to beat the full-year target of 7.5 percent, but that will be a marked slowdown from last year's 9.2 percent growth and the average of around 10 percent for the last three decades.

Beijing has been following a programme of pro-growth fine-tuning of economic policies for a year and analysts broadly expect that to remain in place when a new leadership line-up of the ruling Communist Party is unveiled at a Congress this month.

China's central

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