China’s services industries expanded at the slowest pace since September as a gauge of new orders declined, adding to signs a recovery in the world’s second- biggest economy is moderating.
The non-manufacturing Purchasing Managers’ Index fell to 54.5 in February from 56.2 in January, the Beijing-based National Bureau of Statistics and China Federation of Logistics and Purchasing said in a statement today. The index’s reading has been above 50, which indicates expansion, for at least two years.
Today’s report adds to concerns that China’s rebound from a seven-quarter slowdown is losing steam after two manufacturing indexes released last week showed declines. Communist Party leaders, meeting before the annual session of the legislature this week, warned of “severe challenges” facing the country amid a “complex international situation and difficult domestic tasks” including reform and maintaining stability, the official Xinhua News Agency reported Feb. 28.
“February is a low season for construction activities which led to moderating activity in non-manufacturing,” Cai Jin, a vice chairman at the federation, said in a statement accompanying the report. “But looking at data from the past two months, the non-manufacturing economy continued relatively fast growth this year and the good trend is expected to continue as the peak season for construction and consumption approaches.”
A gauge of new orders declined 1.9 points from January to 51.8, the weakest reading since October, according to today’s statement. Consumption of food and drink cooled, the federation said, prolonging a slump that emerged in January.
Communist Party chief Xi Jinping’s crackdown on extravagant spending and lavish banquets by government departments and state-owned enterprises has hurt sales at high-end restaurants and demand for expensive liquor. Growth in food sales at outlets monitored by the Ministry of Commerce fell to 9.8 percent over the weeklong Lunar New Year holiday last month, down from a 16.2 percent pace over the festival period in 2012, data last month showed.
The Shanghai Composite Index (SHCOMP) fell 0.3 percent on March 1, paring last week’s gain to 2 percent, after two manufacturing indexes showed a slower-than-estimated pace of expansion. The federation’s official PMI had a reading of 50.1, the weakest in five months, while a separate gauge from HSBC Holdings Plc and Markit Economics dropped to a four-month low of 50.4.
HSBC will report its February services index on March 5. The gauge rose to 54 in January from 51.7 the previous month.
Economic data in January and February are “significantly distorted” by the weeklong Chinese Lunar New Year holiday, Lu Ting, chief Greater China economist at Bank of America Corp. in Hong Kong, said in note after the manufacturing data. The festival was celebrated in February this year and January last year. “We believe the Chinese economy is still on a cyclical upturn,” Lu wrote.
Some services industries surveyed by the federation showed a brighter outlook, offering policy makers comfort that the slowdown may not be broad based.
New orders for civil engineering construction rose to a record high, indicating the sector’s “sustained and strengthening drive” behind the economy, according to the federation. A gauge of business expectations in the real-estate industry rose to an almost two-year high.
China’s economy expanded 7.9 percent in the final three months of 2012 from a year earlier, the first pickup in eight quarters. Growth may accelerate to 8.2 percent in the three months through March, according to the median estimate of 23 analysts surveyed by Bloomberg News.
Premier Wen Jiabao will this week formally announce this year’s economic targets when he delivers his final work report to the National People’s Congress. The goal will be maintained at 7.5 percent, Bloomberg News reported in December, citing two bank executives and a regulatory official briefed on the matter. Expansion slid to 7.8 percent last year, the least since 1999.
“It’s still too early to say decisively how strong the current recovery is, but our conjecture is that it is relatively weak compared to past ones,” Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong, said before the data.
The logistics federation’s non-manufacturing index is based on responses from purchasing managers at 1,200 companies in 27 industries including banking, retailing, construction and transport. A new seasonally adjusted series began in March 2012 and the data were revised back to March 2011.
--Nerys Avery. With assistance from Zhang Shidong in Shanghai, Jessica Zhou and John Liu in Beijing. Editors: Nerys Avery, John Liu
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