China’s non-manufacturing growth slows down

Beijing: China’s non-manufacturing industries expanded at a slower pace for a second month, as export orders declined and weakness in real estate countered strength in retailing and leasing, an official survey indicated,

The purchasing managers’ index fell to 55.2 in May from 56.1 in April, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in a statement today in Beijing. A reading above 50 indicates expansion.

The data add to evidence of slower growth in the world’s second-biggest economy as Europe’s debt crisis crimps overseas demand and government curbs on real estate feed through to more industries. A manufacturing report on June 1 showed the weakest reading since December, helping send Brent crude tumbling below $100 a barrel for the first time in almost eight months.

“Although the index fell slightly in May, it was still at a relatively high level of 55.2 which is in line with the general trend of steady growth in non-manufacturing industries,” Cai Jin, a federation vice-chairman, said in the statement.

“Market demand remains steady and reflects the structural changes in our country’s economy.”

Non-manufacturing industries account for about 40 per cent of the economy, according to the federation.

The PMI, which is seasonally adjusted, is based on a survey of about 1,200 companies covering 27 service industries including construction, telecommunications and transport.

Boost Demand

Premier Wen Jiabao and the State Council, or Cabinet, warned last month that the economy faces increasing downward pressure.

They pledged to put a greater focus on growth and “actively” boost domestic demand.

The National Development and Reform Commission may be accelerating construction approvals as part of measures to counter a slowdown that Credit Suisse Group estimates will push economic growth down to 7 per cent or “slightly below” this quarter compared with a year earlier.

Expansion moderated to 8.1 per cent in the first three months of the year, the fifth straight quarterly slowdown.

Stimulus

Dong Tao, Credit Suisse’s Hong Kong-based economist, estimates the government may implement a stimulus in the range of 1 trillion yuan (Dh576 billion) to 2 trillion yuan while Credit Agricole strategist Dariusz Kowalczyk said a total 1 trillion yuan may be needed this year and next to spur growth.

A manufacturing PMI compiled by the statistics bureau and logistics federation fell to 50.4 in May from 53.3 in April, a June 1 report showed.

The reading, barely above the 50 mark that divides expansion from contraction, was the lowest in five months and compares with a 52.0 median estimate in a Bloomberg News survey of 27 economists.

A separate gauge from HSBC Holdings and Markit Economics released the same day showed a seventh straight contraction, the longest since the global financial crisis.

Inflation indicators in both the non-manufacturing and manufacturing PMIs declined in May, giving policy makers more room to implement stimulus to combat the slowdown.

Consumer prices rose 3.4 per cent in April from a year earlier, below the government’s 4 per cent target for 2012 for the third month.

A gauge of input prices in today’s survey fell to 53.6 from 57.9 in April, while a sub-index measuring the prices charged for goods contracted, showing a below-50 reading for the first time this year, according to the statement.

The federation’s official manufacturing PMI showed input prices contracting for the first time since December.

The “obvious” decline in prices “could take some pressure off inflation,” Cai said in today’s statement.

The federation started publishing a seasonally adjusted index for the non-manufacturing PMI from its March survey, and revised readings back to March 2011.

A separate services industries gauge will be released by HSBC and Markit on Tuesday.