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China June HSBC services PMI expands modestly

A woman walks past a van which has been converted into a stall selling nail polish on a sidewalk in Beijing, June 4, 2013. REUTERS/Barry Hua
A woman walks past a van which has been converted into a stall selling nail polish on a sidewalk in Beijing, June 4, 2013. REUTERS/Barry Hua

BEIJING (Reuters) - Activity in China's services sector was lackluster 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/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 percent 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 slowed to multi-month lows in June on faltering new orders.

The HSBC service PMI follows a similar survey by China's National Bureau of Statistics, which found growth in non-manufacturing activity slowed to 53.9 in June from May's 54.3. The official PMI survey captures activity of mostly large, state-owned firms.

In the HSBC survey, a sub-index for new orders fell to 50.5 in June, the lowest since November 2008. Only 9 percent of survey respondents saw new orders rise that month, HSBC said.

"With sluggish growth of new orders, employment growth is under pressure," Qu said.

Employment is a decisive factor shaping China's government policy because it is crucial for social stability. The employment sub-index in the HSBC poll showed employment improved for the second consecutive month in June.

China's job market has held up even though its economy is likely to grow at its slackest pace in at least 14 years this year. The resilient labor market explains in part Beijing's ease with the country's fizzling economic growth momentum.

China's President Xi Jinping said over the weekend that officials should no longer be evaluated against economic growth but with consideration to other indicators including welfare and ecological improvements and social development.

(Reporting By Xiaoyi Shao and Koh Gui Qing; Editing by Jacqueline Wong)

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