PMIs fuel hope economy is stabilizing, property still a
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[June 03, 2014]
BEIJING (Reuters) - China's
factory and services sectors had their best showings in
months in May as demand rebounded, surveys showed,
fuelling optimism that its economy may be steadying
after a weak start to the year.
"Exports are picking up and the impact of the 'mini stimulus' is
gradually being felt," said Tao Wang, an economist at UBS, referring
to recent government measures to revive growth.
"We expect this to last in the second and third quarters."
The final HSBC/Markit purchasing managers' index (PMI) rose to 49.4
in May, a four-month high and compared to April's 48.1.
Though the final reading was still under the 50-point level that
separates growth in activity from contraction, the improvement
nonetheless stirred hopes that the economy is working its way
through its prolonged soft patch.
The buoyancy was mirrored by a similar acceleration in growth in the
services sector, where a government-released PMI climbed to a
six-month high of 55.5, from April's 54.8.
The survey results augur well for China's monthly economic data that
will be released from June 8, and gave a fillip to Asian stock
China's economy has had a bumpy ride this year as an under whelming
run of data showed an extensive cooldown in investment, retail sales
and factory output, feeding concerns that growth could fall further
from an 18-month low seen between January and March.
Worried that a broadening downturn would cause unemployment to spike
and threaten China's social stability, the government is trying to
bolster growth by pump-priming the economy.
Authorities have hastened infrastructure investment, accelerated
state spending, and twice lowered the reserve requirements for some
banks -- with its most recent reduction made on Friday.
The measures appear to be working.
"Improving conditions in developed markets and further targeted
loosening measures announced last week should continue to support
the manufacturing sector," said Julian Evans Pritchard from Capital
"This should give policymakers more leeway to allow a greater
cooling of the property sector."
NEAR THE BOTTOM?
A breakdown of Tuesday's PMIs showed domestic and foreign demand is
looking up for China.
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The services PMI, a barometer for the health of the economy, showed
new orders jumped to an eight-month high of 52.7 in May, compared to
Companies also retained their confidence, with business expectations
holding ground at a solid 60.7, compared to April's 61.5.
In the HSBC PMI poll, a turnaround in an export indicator was even
more dramatic. The new export orders sub-index leapt to a four-year
high of 53.2 in May from April's 48.9
"The economy is stabilizing, but it is too early to say that it has
bottomed out, particularly in light of a weaker property sector,"
said Qu Hongbin, chief economist for China at HSBC.
Up against slowing sales and less generous funding for property
developers, China's real estate market has softened this year after
last year's stellar performance, causing price growth to drop an
11-month low in April.
As the sector accounts for over 15 percent of China's annual
economic output and affects production in over 40 industries, many
analysts view the property downturn as one of the biggest risks to
the Chinese growth engine this year.
(Reporting by Koh Gui Qing; Editing by Kim Coghill)
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