China services index rises to year's high in rebound sign
Nov 04 2013
The non-manufacturing Purchasing Managers' Index advanced to 56.3 in October from 55.4 in September, the Beijing-based National Bureau of Statistics and China Federation of Logistics and Purchasing said on Sunday in Beijing. A number more than 50 indicates an expansion.
Stronger consumption and employment suggested in Sunday's report may bolster the government's confidence that the third-quarter economic recovery is holding up after two manufacturing indexes last week rose more than estimated. Top Communist Party officials will meet this week to decide policy changes that may help China avoid a sharper slowdown in its longer term expansion as the investment and export-led growth model runs out of steam.
"Growth momentum will still be relatively robust" in the fourth quarter, said Lu Ting, head of Greater China economics at Bank of America Corp in Hong Kong. "The room for a further improvement in the non-manufacturing PMI is limited so we should still avoid being too bullish," he said, pointing to a decline in new orders and a contraction in export orders in Sunday's report.
Lu estimates gross domestic product will rise 7.7 per cent in the fourth quarter from a year earlier, down from 7.8 per cent in the July-September period. The pace could rebound to close to 8 per cent in the first half of next year due partly to a low comparative base with 2013, he said.
China's GDP will increase 7.6 per cent this year, according to the median estimate of 52 economists surveyed by Bloomberg last month. That's down from 7.7 per cent in 2012 and the same pace as 1999, which was the weakest expansion since 1990. Growth may slide to 7.4 per cent in 2014, according to the median projection of 47 analysts.
President Xi Jinping said yesterday he's confident China will show "sustainable and healthy economic growth," according to a report from the Xinhua News Agency. The nation is transforming its mode of development and readjusting its economic structure through a new style of industrialisation, urbanisation, technology and agricultural modernisation, he said.
Sunday's report follows two manufacturing PMIs released November 1. An index from HSBC Holdings Plc and Markit Economics rose at the fastest pace since March. The federation's gauge advanced to an 18-month high driven by faster output, while measures of new orders and export orders declined.
"Like the manufacturing PMI, activity in the non-manufacturing PMI appears to have run ahead of demand," said Ding Shuang, senior China economist at Citigroup Inc in Hong Kong, pointing to a 1.8 per centage point drop in the new order sub-index in today's report and a widening gap between a gauge of business activity and new orders.
"Unless demand catches up, this pace of activity expansion will not be sustainable," he said.
A gauge of business expectations in the non-manufacturing survey rose to 60.5 from a 2013 low of 60.1 in September, according to the CFLP statement.
"In the next few months, the non-manufacturing economy should continue to develop at a stable pace," Cai Jin, a vice chairman at the logistics federation said in the statement. "We still need to strengthen market training and upgrading in order to further release the potential of the services industry."
President Xi and Premier Li Keqiang have indicated that the days of GDP expansion of more than 10 per cent a year are over. The government will focus on policy changes to support more sustainable growth that will reduce inequality and doesn't damage the environment.
Speaking on saturday, Xi said a blueprint for "comprehensive reform" will be put forward to the third plenary session of the Communist Party Central Committee, according to Xinhua. The reforms to be discussed at the meeting, which will take place in Beijing from November 9-12, will be "unprecedented," Yu Zhengsheng, ranked fourth in the seven-strong Politburo Standing Committee, said last month.
Li said in September that the economy is entering a phase of "transformation" involving a slowdown in growth "from a high speed to a medium to high speed." He has also signaled that the government's bottom line for expansion is 7 per cent, the level needed to meet the Communist Party's target of doubling per capita income in the decade through 2020.
Industries including leisure, e-commerce and transport are becoming a bigger part of the economy, supporting the government's efforts to shift the focus of growth away from investment and exports. Alibaba Group Holding Ltd, China's biggest e-commerce company, plans a fivefold increase in the number of college graduates it hires to 1,000 and may offer them as much as triple last year's average pay.
Service industries accounted for about 45 per cent of GDP last year, according to statistics bureau data, up from 41 per cent in 2003. The government is seeking to increase the share to 47 per cent by 2015, according to its five-year plan. In the US, services comprise about 90 per cent of the economy.
The non-manufacturing index from the statistics bureau and CFLP is based on responses from purchasing managers at 1,200 companies in 27 industry groups including catering, retailing, construction and transportation.
A new seasonally adjusted series began in March 2012 and the data were revised back to March 2011. HSBC and Markit will release their services PMI for October on November 5. Their index fell to 52.4 in September from 52.8 in August.