UPDATE 2-China's October factory, services surveys show economy still wobbly

Sun Nov 1, 2015 12:40am EDT
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* Official survey shows factories contract, services cooling

* Both reports show export orders shrink, staff layoffs

* More interest rate cuts, support measures expected (Adds economists' reactionofficial comments)

By Xiaoyi Shao and Nicholas Heath

BEIJING, Nov 1 (Reuters) - Activity in China's manufacturing sector unexpectedly contracted in October for a third straight month, an official survey showed on Sunday, fuelling fears the economy may still be losing momentum in the fourth quarter despite a raft of stimulus measures.

Adding to those concerns, China's services sector, which has been one of the few bright spots in the economy, also showed signs of cooling last month, expanding at its slowest pace in nearly seven years.

As the first major indicators of business conditions in China released each month, the PMIs reinforced the view that the economy remains in the midst of a gradual slowdown which will require Beijing to roll out more support in coming months.

"While the PMI has stabilised, it is too early to confirm a bottoming out," economists at ANZ Bank said in a note.

"As deflation risks intensify, a further RRR cut before end of this year is still possible," ANZ said, referring to reducing the amount of reserves that banks must hold in order to free up more funds for new loans.   Continued...