China’s services industries expanded last month at the slowest pace since September last year 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 (PMI) fell to 54.5 last month from 56.2 in January, the Beijing-based National Bureau of Statistics and China Federation of Logistics and Purchasing said in a statement yesterday.
The index’s reading has been above 50, which indicates expansion, for at least two years.
Yesterday’s report adds to concerns that China’s rebound from a seven-quarter slowdown is losing steam after two recently released manufacturing indices showed declines.
Chinese Communist Party leaders, meeting before the annual session of the legislature, warned of “severe challenges” facing the country amid a “complex international situation and difficult domestic tasks,” including reform and maintaining stability, Xinhua news agency reported on Thursday.
“February is a low season for construction activities which led to moderating activity in non-manufacturing [sectors],” Cai Jin (蔡瑾), a vice chairman at the federation, said in a statement accompanying the report.
“However, 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,” Cai added.
A gauge of new orders declined 1.9 points from January to 51.8, the weakest reading since October last year, according to yesterday’s statement. Consumption of food and drink cooled, the federation said, prolonging a slump that emerged in January.
Chinese Vice President Xi Jinping’s (習近平) 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 Chinese Ministry of Commerce fell to 9.8 percent over the week-long Lunar New Year holiday last month, down from a 16.2 percent pace over the festival period last year, data last month showed.
The Shanghai Composite Index fell 0.3 percent on Friday, paring last week’s gain to 2 percent, after two manufacturing indices 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 is scheduled to report its services index for last month tomorrow. The gauge rose to 54 in January from 51.7 the previous month.
Economic data for January and last month are “significantly distorted” by the week-long Chinese Lunar New Year holiday, Lu Ting (陸挺), chief Greater China economist at Bank of America Corp in Hong Kong, said in note.
“We believe the Chinese economy is still on a cyclical upturn,” Lu added.
Some services industries surveyed by the federation showed a brighter outlook, offering policymakers 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, the federation said.
A gauge of business expectations in the real-estate industry rose to an almost two-year high.