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August 4, 2014

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Home » Business » Economy

July services PMI hits 6-month low

Source: Agencies | August 4, 2014, Monday | Print Edition

GROWTH in China’s services sector slipped to a six-month low in July as new orders rose at their weakest rate in at least a year, data showed, taking some of the shine off an industry that has been a bright spot in the Chinese economy this year.

The official Purchasing Managers’ Index for the non-manufacturing sector slowed to 54.2 in July from June’s 55, the National Bureau of Statistics said yesterday. That is the weakest reading since January.

A reading above 50 in PMI surveys indicates an expansion in activity while one below the threshold points to a contraction. The slight retreat in the services sector came at a time when China’s factories have started to recover, having earlier this year been one of the drags on growth in the world’s second-largest economy due to faltering demand at home and abroad.

In contrast, China’s services companies have held up through each slowdown since PMI records began in January 2007, with the index staying above 50 in every month.

A mixed performance from other measures in yesterday’s PMI suggested that the services sector enjoyed an encouraging, albeit slightly muddy, outlook.

Growth in new orders fell to their slackest rate in at least a year in July. Yet at the same time, companies’ business expectations jumped to a level not seen in at least a year. Inflation within the sector, be it production or final sales prices, also quickened to a rate unseen in at least 12 months.

Cai Jin, vice president of China Federation of Logistics & Purchasing, which publishes the services PMI in conjunction with China’s government, advised investors to not read too much into the divergence.

“The volatility in the various sub-indices for the July services PMI was not great,” Cai said. “The market in general is still stable.” In contrast, he said weakness in China’s property sector persisted last month due to seasonal factors and muted demand. “The market remains subdued. Prices are still in a downtrend, and declines have increased.”

China’s once-heated housing market has slowed this year as sales and prices turned south in their biggest pullback in two years, driven in part by a cooling economy, and after the government tried for almost five years to calm the market.

Yesterday’s survey showed a sub-index for business expectations rose to 63.9 last month from June’s 62.9, while the measure for new orders slipped to 50.3 from June’s 50.9.

Production prices climbed to 58.2 from June’s 57.1, while final sales prices jumped to 52.4 from June’s 51.2.

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