The official Purchasing Managers' Index (PMI) for the
non-manufacturing sector slowed to 54.2 in July from June's 55, the
National Bureau of Statistics said on Sunday. 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 Sunday's PMI suggested
that the services sector enjoyed an encouraging, albeit slightly
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
"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 pull-back in two years, driven
in part by a cooling economy, and after the government tried for
almost five years to calm the market.
But the extent and breadth of the downturn have surprised analysts,
with many worrying that it is the biggest threat to the health of
China's economy this year.
To limit the drag from a cooling housing sector on the overall
economy, nearly half of China's regional governments have started
relaxing curbs on home purchases this year, reversing controls that
were instituted from as early as 2009.
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STRONGER FACTORY GROWTH
The services PMI followed two manufacturing PMIs released on Friday
that showed China's factory sector posting its strongest growth in
at least 1-1/2 years last month, suggesting that the economy is
gathering steam after a spate of stimulus measures.
Economic growth picked-up slightly in the second quarter,
accelerating to 7.5 percent from an 18-month low of 7.4 percent
between January and March.
Sunday's survey showed a sub-index for business expectations rose to
61.5 last month from June's 60.4, while the measure for new orders
was flat at 50.7.
Production prices fell to 53.4 from June's 56, while final sales
prices also dropped to 49.5 from June's 50.8.
In fact, Chinese authorities have steadily loosened monetary policy
since April to energise the economy, including relaxing the reserve
requirements for some banks. The construction of railways and public
housing projects have also been hastened to spur investment.
The services sector, which accounted for 45 percent of China's gross
domestic product in 2012 and roughly half of all jobs in the
country, is expected to post steady growth in coming years as the
(Reporting by China Economics Team; Editing by Simon Cameron-Moore)
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