China services sector expands

Thu, Apr 5, 2012, 01:00

China's services sector expanded solidly in March and business confidence hit an 11-month high, though overall activity remained below its long-term average.

The seasonally adjusted HSBC Services Purchasing Managers Index (PMI) stood at 53.3 in March, down slightly from February's 53.9, but still signalling healthy growth with the new business sub-index extending its unbroken period of expansion to 40 months.

The upbeat survey echoes China's official non-manufacturing PMI, which delivered a reading of 58 for March when it was published on Tuesday with a revised methodology that saw February's index revised up to 57.3 from a previous level of 48.4 under the old calculation.

A PMI reading below 50 indicates contracting activity while a reading above 50 shows expansion.

The HSBC Services PMI, compiled by UK-based data provider Markit, registered firmer client demand and anecdotal improvement in overall business conditions with service providers able to pass on higher input costs to customers via increased output charges.

But while headline readings in the main index and various component parts of the survey showed steady growth, the data came laced with caveats about underperformance versus trend growth rates and that jobs growth in the sector was the weakest in the current period of expansion.

Qu Hongbin, HSBC's Hong Kong-based chief economist for China, said that overall economic growth appeared to be losing some steam from his perspective -- whether in export orders, industrial production or employment.

"All these call for further easing measures, while inflationary pressures should remain relatively contained in the coming months," Mr Qu said in a statement accompanying the index.

Reuters