China services PMI at five-month high, adds to signs of recovery

Tue Sep 3, 2013 11:53pm EDT
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BEIJING (Reuters) - Growth in China's services sector hit a five-month high in August, underpinned by optimism over government policy measures, a private survey showed, the latest evidence that the world's second-largest economy may have avoided a sharp slowdown.

The Markit/HSBC Services Purchasing Managers' Index (PMI) climbed to 52.8 in August, up from July's 51.3 and the highest since March, the survey showed on Wednesday. The data came on the heels of three other PMI surveys this week that pointed to a pick-up in activity at factories and service firms.

Investors had as recently as a month ago worried that China's economy was slipping into a deeper-than-expected downturn, especially after its money market was hit by an unprecedented cash crunch in June.

But policymakers have stepped in with a series of measures aimed at stabilizing the economy, including quickening railway investment and public housing construction and introducing policies to help smaller companies with financing needs.

"It's still too early to say that the economy has reversed its downward trend, but we have seen some signs of recovery," said Xianfang Ren, senior economist with IHS Global Insight in Beijing.

"Between June and now, the biggest change has been in policy expectations, with China rolling out some steps to boost growth. That has helped business sentiment, hence lifting the PMI readings," Ren said.

Attention now turns to the raft of data for August due from this weekend, with investors looking to figures for trade, industrial output, inflation, money supply and investment to further gauge how the country is faring in its efforts to reverse slowing growth.

Data in July had showed a pick-up in trade and industrial output, while foreign investment into China also quickened, adding to confidence in the economy.

Earlier this week the government's official PMI for manufacturing rose to 51.0 in August from 50.3 in July, the highest level since last April and ahead of market expectations, while the official services PMI was little changed at 53.9 in August versus July's 54.1.   Continued...

Sales people wait for customers at booths selling mobile phones in Beijing September 3, 2013. REUTERS/Kim Kyung-Hoon