Services growth hits 8-month low

Updated: 2014-10-06 14:10

By Jack Freifelder in New York(China Daily USA)

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The services sector in China grew at its slowest pace over the last eight months in September, according to data published Oct 3, exposing more moderation in the growth of non-manufacturing sectors in the world's second-largest economy.

The official non-manufacturing Purchasing Managers' Index (PMI) edged down to 54.0 in September from 54.4 in August, the National Bureau of Statistics said, after new orders shrank for the first time since the 2008 global financial crisis.

Underwhelming performance in the housing sector weighed on overall new orders, which fell from 50 in August to 49.5 this month, a level not seen since December 2008.

Most of the other components of the index declined as well, with the services sector dropping from 53.6 in August to 52.5 in September, and indices for property, aviation and water transportation all coming in below 50, the China Federation of Logistics and Purchasing (CFLP) said.

But overall PMI figures for the month were still well above the 50-point mark that demarcates growth.

Cai Jin, deputy head of the CFLP, told Xinhua earlier this week: "Business activities in the property market have stabilized at low levels but stayed within the contractionary area, suggesting overall activities remained sluggish."

He also said that this month's data showed adequate growth in China's overall non-manufacturing business activity. Satisfactory performance in the construction sector suggested that investment could support stable growth in the near term.

The measurement of construction activities rose to 60.2 from 57.7 month over month, the federation said.

PMI data are an economic indicator formulated from responses to monthly surveys of companies in the private sector. A reading above 50 on the PMI scale indicates economic expansion, while a reading below 50 represents contraction.

The non-manufacturing PMI covers services including retail, aviation and software as well as real estate and construction. Data compiled for the report are based on replies to monthly questionnaires sent to purchasing executives at 1,200 companies in 27 nonmanufacturing sectors.

On Tuesday, China moved to revitalize its housing market by cutting mortgage rates and downpayment levels on homes for some buyers.

It's too soon to tell if the move will help to turn around the housing market, but reports from several Chinese media outlets suggest the move has "piqued buyers' interest," according to a Thursday report from Reuters.

Accounting for about 15 percent of China's gross domestic product, the housing market affects 40 other sectors from glass to cement to electronic appliances.

"The 'Golden September' peak season in the property sector did not materialize," Wu Wei, an official at the CFLP, told Reuters in an interview earlier this week. "The market tracked a weak trend and activity was on the subdued side."

Hak Bin Chua, an analyst at Bank of America Merrill Lynch, wrote in a recent research note that China's slowdown risks are undermining the lift to the Asia region from a stronger US economy. Cooling import demand from China is also disproportionately hurting Asian commodity exporters such as Indonesia and Thailand, he said.

But further support measures are to be announced in the coming months.

The non-manufacturing PMI data came after the release of the manufacturing PMI, which was 51.1 percent in September, unchanged from August.

Qu Hongbin, an economist with HSBC and one of the authors of its China PMI report, said: "Overall, the data in September suggest that activity continues to expand at a slow pace. Risks to growth are still on the downside and warrant more accommodative monetary as well as fiscal policies."

Xinhua and Reuters contributed to this story.

(China Daily USA 10/06/2014 page3)