China services PMI falls to lowest in nearly two years

Wed Oct 3, 2012 12:34am EDT
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By Lucy Hornby

BEIJING (Reuters) - China's normally robust services sector weakened sharply in September to its lowest point since November 2010, as slow growth in manufacturing finally began to feed through to the rest of the economy, an official survey showed on Wednesday.

The official purchasing managers' index (PMI) for the sector fell to 53.7 in September from 56.3 in August, weighed by weakened construction services and transport as well as lackluster new orders overall, according to the latest survey from the National Bureau of Statistics.

The services index follows official and private sector PMI surveys of China's vast manufacturing industry that showed growth stabilizing at a slower pace, almost certainly signaling a seventh straight quarter of slowing economic growth in the world's second-largest economy [ID:nB9E8IO00W].

"The trend looks quite persuasive that we are now heading down to slower levels, which shows the impact of the slowdown on urban services," said Stephen Green, head of research for Greater China at Standard Chartered in Hong Kong.

"If your manufacturing sector has been slow for six months it makes sense it would feed through to other services like banking and other related services. It had been insulated for a while."

The value is the lowest in nearly two years, although the sector remains above the 50-point line that divides expansion from contraction. As China's economy matures and becomes more consumer-oriented, the services sector would be expected to post stronger growth than the manufacturing sector, which boomed earlier.

The China Federation of Logistics and Purchasing conducts the survey on behalf of China's National Bureau of Statistics. A similar survey of China's services sector will be released by HSBC on Monday.

China's fast-growing services industry had weathered the global slowdown much better than the factory sector, with the PMI consistently signaling healthy expansion and hitting a 10-month high of 58.0 in March.   Continued...