China's service sector grew at the weakest pace in ten months in June, the latest survey by Markit Economics showed Wednesday.
The slowdown in services activity coupled with the disappointing results of the manufacturing survey, fuels worries over a deep economic slowdown in world's second largest economy than initially thought.
The HSBC business activity index, that measures the performance of the service sector, fell to a 10-month low of 52.3 in June from 54.7 in May. An index reading above 50, however, indicates expansion of the sector.
The official survey continued to show sharp divergence with the Markit/HSBC report. The survey by China Federation of Logistics and Purchasing (CFLP) and the National Bureau of Statistics showed Tuesday that China's non-manufacturing sector expanded at a faster pace in June with the new order growth reaching its highest level this year.
Markit today said the composite output index, that measures activity in both manufacturing and service sectors, fell to 50.6 in June from 51.9 in May. The slowdown at the composite level reflected a sharper decline in manufacturing output and a moderation of activity growth in the service sector.
The latest Markit/HSBC survey of the factory sector showed that manufacturing remained in contraction for an eighth consecutive month in June, as output, incoming new orders and employment continued to decrease.
The pace of new order growth in the service sector eased in June with the index measuring trends in overall new work at a ten-month low, Markit survey showed today. At the composite level, the new orders fell for the first time in 2012 so far.
Employment at service providers increased in June. The latest increase in headcounts was the third-weakest in the current 41-month period of growth. Composite data pointed to the fourth successive month of job shedding in June.
"Services activities softened in June due to slowing new business flows, which translated into only marginal growth of employment," HSBC chief economist Hongbin Qu said. "This, plus the ongoing slowdown of manufacturing sectors, points to growing pressures on the jobs market - the last thing Beijing policy makers want to see."
"But with inflation also falling fast, we believe Beijing has sufficient room to step up easing and revive domestic demand," Hongbin added.
The rate of input price inflation in the service sector was the weakest in the current 32-month period of higher costs. At the same time, manufacturers recorded a sharp and accelerated decline in purchasing costs. As a result, input prices fell at the sharpest rate in 39 months at the composite level.
Service providers lowered their average tariffs in June, at the sharpest pace in 38 months. Meanwhile, optimism among Chinese service providers remained subdued mainly owing to economic uncertainty.
by RTT Staff Writer
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