Lacklustre services growth in China fuels fears of a slowdown

City A.M. Reporter

ACTIVITY in China’s services sector was lacklustre in June as new orders grew at their weakest pace in more than four years, a survey showed, providing further evidence that the world’s second-largest economy was losing momentum.

The HSBC and Markit purchasing managers’ index (PMI) for the services industry inched up to 51.3 last month from May’s 51.2, after growth in new orders hit a 55-month low and business confidence slumped to depths last seen in late 2005 when records began.

A reading above 50 indicates expansion in business activity, while one below 50 implies contraction.

The services sector accounted for 46 per cent of China’s economy in 2012, and its tepid growth may worsen investor fears that China’s economic cooldown is deepening. Most analysts now expect China’s economy to slow further in the second quarter.

“The underlying growth momentum is likely to be softening for services sectors, along with the slowdown of manufacturing growth,” said Qu Hongbin, HSBC’s China chief economist.

A pair of manufacturing PMI surveys showed on Monday that growth in China’s factory sector had slowed to multi-month lows in June after new orders faltered.