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China Non-Manufacturing Index Fell in July


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China’s non-manufacturing industries expanded at a slower pace in July as new orders and outlooks for future business slipped, an official survey indicated.

The purchasing managers’ index fell to 55.6 from 56.7 in June, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in Beijing today. Readings above 50 indicate expansion.

Today’s report shows the slowdown in China’s exports and industrial production may be spreading to services, which would add pressure on Premier Wen Jiabao to introduce more measures to stem the slide. A manufacturing index had the weakest reading in eight months in July as gauges of overseas orders and output fell to the lowest levels since November, federation data this week showed.

“China’s Politburo has decided to boost domestic demand in the second half of this year by improving people’s spending power,” Cai Jin, a vice chairman with CFLP, said in a statement today. “That will help service industries maintain stable and fast growth.” He said the stable growth situation in services hasn’t changed.

The benchmark Shanghai Composite Index (SHCOMP) dropped 14 per cent from this year’s peak on March 2 through yesterday on concern the economic slowdown will hurt corporate earnings. The gauge rose 0.1 per cent at 10:37 am after falling to a three-year low earlier this week.

Leaders of the ruling Communist Party pledged this week to keep adjusting policies to ensure stable economic development, describing the external environment as posing “difficulties and challenges.” At the same time, they said the current pace of growth is “within expectations” even as expansion slowed to a three-year low of 7.6 per cent in the second quarter.

A separate services industries gauge from HSBC Holdings Plc and Markit Economics today increased to 53.1 in July from 52.3.

“To secure growth and employment, Beijing still needs to step up policy easing and fast falling inflation allows them to do so,” Qu Hongbin, Hong Kong-based chief China economist for HSBC, said in a statement today.

Service industries account for about 43 per cent of the economy compared with about 90 per cent in the U.S. Under China’s current five-year plan, the government is seeking to raise the share of services in gross domestic product to 47 per cent by 2015, the official Xinhua News Agency said in May.

The federation’s manufacturing Purchasing Managers’ Index released on Aug  1 unexpectedly fell to 50.1 in July, with three of 24 economists surveyed forecasting a decline from June. A separate survey from HSBC and Markit indicated manufacturing contracted for a ninth month, albeit at a slower pace than in June.

The official non-manufacturing PMI is based on a survey of about 1,200 companies covering 27 industries including construction, transport and telecommunications. The federation and statistics bureau started publishing a seasonally adjusted index for the non-manufacturing PMI from the March survey, and revised readings back to March 2011.

(Source: Bloomberg)

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