China March services PMIs hit multi-month highs

Wed Apr 3, 2013 2:36am EDT
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BEIJING (Reuters) - Growth in China's services sectors rose to multi-month highs in March as a construction boom and firmer demand lifted business and confidence, auguring well for a modest recovery in the world's second largest economy.

The official purchasing managers' index (PMI) for the non-manufacturing sector climbed to 55.6 in March from February's 54.5, aided by a buoyant construction sector. A PMI reading above 50 indicates accelerating activity.

A separate services PMI published by HSBC showed growth rebounding to a six-month high of 54.3 in March as improving economic conditions lifted demand, pushing business confidence to a 10-month high of 65.0.

Analysts welcomed the data as an encouraging sign that China's moderate economic revival is extending beyond its factories into an increasingly-important services industry.

"China is on track to beat the government's growth target for 2013," said Dariusz Kowalczyk, an economist at Credit Agricole CIB in Hong Kong, referring to Beijing's goal of expanding gross domestic product (GDP) by 7.5 percent this year.

"Services account for a larger share of GDP than manufacturing so improvement of sentiment here bodes well for the entire economy," said Kowalczyk, whose 8.5 percent GDP forecast for China in 2013 is among the most bullish in the market.

China's services industry has weathered the global slowdown much better than its factory sector, in part because it does not rely on exports for growth unlike manufacturers, who have been battered by crumbling foreign demand.

Twin PMI surveys for China's manufacturers published on Monday showed factory production quickened last month on firmer domestic demand, though the speed of the pick-up was not as brisk as some expected.

Indeed, the pair of services PMIs also showed that though firms expanded last month, business is not surging. Overall new orders in the services sector nudged up just 0.2 index points to 52.0 in March from February, the official PMI showed.   Continued...

Workers are seen on a construction site for a new factory at an industrial area in Beijing April 1, 2013. REUTERS/Kim Kyung-Hoon