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China's Service Sector Growth Eases In October

China's Service Sector Growth Eases In October
11/4/2012 11:54 PM ET

China's service sector expansion eased marginally in October amid further moderation in new order growth, a survey by Markit Economics revealed Monday.

The headline HSBC business activity index, that measures the performance of the services sector, fell to 53.5 in October from 54.3 in September, suggesting weaker, yet solid improvement in operating conditions.

An index reading above 50 indicates expansion of the sector, while a reading below 50 suggests contraction.

The composite output index, that measures the performance of both manufacturing and services, posted 50.5 in October, up from 50.3 in September. This was the second successive monthly rise in output at the composite level.

However, Markit's survey of the manufacturing sector signaled a full year of monthly deterioration in business activity.

"Despite the moderation of services activity growth, the Chinese economy is gradually bottoming out as the filtering-through of earlier easing policy is boosting domestic demand," said Hongbin Qu, chief economist at HSBC.

New business increased in the service sector during October, but at a slower pace than in September and weaker than the long-run series average. Service providers increased staff numbers during the month, but only marginally.

At the composite level, new orders rose at the fastest pace in one year largely due to renewed growth of orders placed at manufacturing firms during October. Total employment declined during the month, as manufacturers shed more jobs.

Input prices in both services and manufacturing rose during October, while output charges remained broadly unchanged from September.

Data released by China Federation of Logistics and Purchasing (CFLP) and the National Bureau of Statistics over the weekend showed that China's non-manufacturing sector expanded at a faster pace in October.

The purchasing managers' index for the non-manufacturing sector rose to 55.5 from 53.7 in September, strengthening expectations that the economy is poised for a rebound at the end of the year.

China's economic growth hit a three-year low of 7.4 percent in the third quarter, a tad below the government's full-year target of 7.5 percent.

by RTT Staff Writer

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