Growth in China's services sector quickens in November but outlook still worrying

Tue Dec 2, 2014 10:03pm EST
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BEIJING (Reuters) - China's services sector grew slightly faster in November, two surveys showed on Wednesday, a welcome respite to a run of underwhelming data but still unlikely to allay concerns about the softening Chinese economy.

The encouraging reports about the services sector, which creates more jobs than factories, contrasted sharply with data out on Monday that suggested growth in China's manufacturing industry slid to its lowest in at least six months in November.

That prompted some economists to predict that China would cut interest rates again in coming months after doing so unexpectedly on Nov. 21 to stoke growth in the world's second-largest economy.

"Things have gotten worse rather than better," said Louis Kuijs, an economist at RBS in Hong Kong, adding that any bottoming out in China's sagging housing market is unlikely to lead to a solid rebound next year.

"I predict one more rate cut to lower lending rates to 5.25 percent in the first quarter," he said.

The official non-manufacturing Purchasing Managers' Index, or PMI, rose to 53.9 in November from October's 53.8, well above the 50-point line that separates growth from contraction on a monthly basis.

A separate services PMI published by HSBC/Markit inched up to 53.0 last month from October's 52.9, as new orders rose at their quickest pace in 2-1/2 years.

But the surveys painted a mixed picture about the labour market, which Chinese leaders say is a crucial consideration when setting policy.

The official services PMI showed the labour market shrank for the fifth consecutive month in November as the employment sub-index hovered at 49.5, while the HSBC/Markit survey showed firms were still hiring as companies expanded their businesses.   Continued...

An employee welds the exterior of a vehicle along a production line at a factory in Qingdao, Shandong province December 1, 2014.  REUTERS/China Daily