Service sector activity slides to all-time low
Print Edition
ACTIVITY among the country’s private sector service companies fell to its lowest ever level last month, casting a shadow over the recovery of the wider economy, according to an industry poll.
The HSBC/Markit China Services Business Activity Index for July fell 3.1 points from June to 50, marking its lowest point since the survey was launched in November 2005, research firm Markit said yesterday.
The gauge measures operating conditions in private sector firms, with readings above 50 suggesting expansion, and below 50 indicating contraction. The “flat” July figure ended a 104-month sequence of continuous expansion.
In a sign that economic uncertainty has made service companies more reluctant to spend, a sub-index measuring new business growth also hit a 68-month low of 50.3 in July, the survey said.
Qu Hongbin, chief economist for HSBC China, said the data likely reflected the impact of the near-nationwide slowdown in the real estate sector.
“Across the property market, for agencies and residential service providers, there has simply been less business,” Qu said, adding that on a more positive note, employment and business sentiment in the sector remained relatively stable.
Service companies, which contribute about 46 percent of the country’s gross domestic product and provide about half of its jobs, have been a bright spot in the economy this year. But last month’s sudden and sharp slowdown might push the government to roll out more support policies.
The expected increase in investment over the coming months should be beneficial, Qu said.
Alongside the business activity index, the official non-manufacturing Purchasing Managers’ Index, compiled by the China Federation of Logistics and Purchasing, and weighted toward state-owned enterprises, also fell in July, to a six-month low of 54.2, according to figures released on Sunday.
Despite last month’s stumble, Li Maoyu, an analyst at Changjiang Securities, said he considers the overall economic recovery to be in good shape.
“The picture of the services sector contrasted with the improving performance in manufacturing,” he said, adding that market watchers should not read too much into the divergence.
The HSBC Purchasing Managers’ Index, a gauge measuring operating conditions at private and export-oriented manufacturers, rose to a 17-month high of 51.7 in July, according to data released last week.
The figures reinforced confidence in a recovery that started in the second quarter.
China’s gross domestic product in the April-June period expanded by 7.5 percent year on year, accelerating from 7.4 percent growth in the first three months.
In the first half, economic growth was 7.4 percent, which is largely in line with the government’s full-year target of about 7.5 percent.
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