Non-manufacturing PMI weakens in January

Updated: 2012-02-04 07:48

By Chen Jia (China Daily)

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BEIJING - The pace of expansion in China's non-manufacturing sector weakened in January, dragged down by the cooling housing market, indicating a continued economic slowdown.

The January non-manufacturing Purchasing Managers' Index (PMI) - which illustrates the health of business activity in the sector - declined to 52.9 in January from 56 in December, according to figures jointly released on Friday by the National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing (CFLP).

A sub-index of new orders declined to 48.5 last month, two percentage points lower than in December.

The construction sector saw the most rapid decrease in new orders among the 20 industries in the survey, indicated by the reading of 32.1, according to the NBS.

Readings below 50 suggest contraction, while those above that figure indicate expansion.

Cai Jin, vice-chairman of the CFLP, said that the seasonal downturn in the construction industry and the cooling housing market have slowed the pace of growth of the non-manufacturing economy.

The Business Activity Index for the real estate industry was 38.1, compared with 44.3 in the last month of 2011, the fourth consecutive month that the index has been below 50.

Both investment and speculative demand have been effectively curbed by the government's policies, said Cai.

"Real estate is expected to be the biggest risk to the country's economy in 2012," Stephen Green, chief China economist at Standard Chartered Bank Plc, wrote in a research note.

Housing prices may continue to drop, and in the second quarter the government is likely to take measures to stabilize the real estate market. "Some easing policies may be launched then," Green said.

The US-based rating agency Standard & Poor's recently predicted that the world's second-largest economy could see a further slowdown in GDP growth to about 8 percent this year, with both internal and external headwinds, which may prompt the authorities to provide policy support.

Despite the real estate slowdown, the retail, catering and transport sectors showed expansion, helping to push non-manufacturing PMI above the 50 mark.

HSBC Holdings PLC released a separate non-manufacturing PMI figure of 52.5, showing a steady expansion in January, thanks to a boost from new business.

"However, the overall strength of economic growth remained relatively weak, which will inevitably weigh on the jobs market if weakness persists over the longer term," said Qu Hongbin, the China chief economist with HSBC.