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China’s service sector eases unexpectedly
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China’s service industry moderated unexpectedly in August due to the record heat wave in the country and the government’s continued austerity campaign in the world’s second-largest economy.
The official non-manufacturing Business Activity Index, a comprehensive gauge of the vitality of China’s service industry, lost 0.2 point from July to 53.9 last month, the China Federation of Logistics and Purchasing said yesterday.
A reading above 50 means expansion.
The component indices showed new orders added 0.6 point from July to 50.9 in August, but prices lost 1.2 points to 51.2 and business expectations shed 1 point to 62.9.
“The service sector was stable on the whole although it grew at a slightly slower pace,” said Li Maoyu, an analyst at Changjiang Securities Co. “It was partly due to the weather conditions and the government’s efforts on combating waste and corruption.”
Li said he does not expect any huge improvement in the sector as the austerity campaign will curb excessive consumption. He sees stability in the sector in the coming months.
China aims to shift to a service-led growth model for its economy and reduce reliance on investment and exports. But since the start of the year the government’s austerity campaign has dented consumption in high-end restaurants and hotels and led to reduced sales of expensive liquor and other luxury products.
China’s economy has shown signs of improvements in the past two months after the quick implementation of supportive measures like tax cuts for small companies and less red tape for exporters. Official data covering industrial production, fixed-asset investment, retail sales and foreign direct investment in July came out better than expected.
The official Purchasing Managers’ Index, which measures operating conditions in manufacturers, rose to a 16-month high of 51 last month, the federation said on Sunday.
JPMorgan has raised its forecast of China’s growth to 7.6 percent this year, up from an earlier 7.4 percent.
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