* Official services PMI at lowest since November 2010
* Manufacturing slowdown feeds through to services sector
* Construction, freight feel the pinch
By Lucy Hornby
BEIJING, Oct 3 China's normally robust services
sector weakened sharply in September to its lowest point since
November 2010, as slow growth in manufacturing finally began to
feed through to the rest of the economy, an official survey
showed on Wednesday.
The official purchasing managers' index (PMI) for the sector
fell to 53.7 i n September from 56.3 in August, weighed by
weakened construction services and transport as well as
lacklustre new orders overall, according to the latest survey
from the National Bureau of Statistics.
The services index follows official and private sector PMI
surveys of China's vast manufacturing industry that showed
growth stabilising at a slower pace, almost certainly signalling
a seventh straight quarter of slowing economic growth in the
world's second-largest economy.
"The trend looks quite persuasive that we are now heading
down to slower levels, which shows the impact of the slowdown on
urban services," said Stephen Green, head of research for
Greater China at Standard Chartered in Hong Kong.
"If your manufacturing sector has been slow for six months
it makes sense it would feed through to other services like
banking and other related services. It had been insulated for a
The value is the lowest in nearly two years, although the
sector remains above the 50-point line that divides expansion
from contraction. As China's economy matures and becomes more
consumer-oriented, the services sector would be expected to post
stronger growth than the manufacturing sector, which boomed
The China Federation of Logistics and Purchasing conducts
the survey on behalf of China's National Bureau of Statistics. A
similar survey of China's services sector will be released by
HSBC on Monday.
China's fast-growing services industry had weathered the
global slowdown much better than the factory sector, with the
PMI consistently signalling healthy expansion and hitting a
10-month high of 58.0 in March.
The official services PMI had previously dropped below 55 in
November of 2010 and November of 2009, although the data was not
seasonally adjusted at that time.
Analysts had expected the services sector to start feeling
the chill winds from the manufacturing sector, which has
fluctuated below 50 for almost every month since June 2011,
according to the HSBC PMI survey, which tracks more of the
private factories vital to job creation.
The HSBC manufacturing PMI reading of 47.9 in September
extended the longest run of readings below 50 in the survey's
8-year history, with the need for more pro-growth government
policies signalled by a fall in the output sub-index to its
lowest since March and a slide in export orders to a
The more cautious official manufacturing PMI, which tends to
reflect larger, state-owned enterprises, has also been below 50
for two months running.
A Reuters poll last month forecast China's annual economic
growth could ease to 7.4 percent in the third quarter, before
picking up to 7.6 percent in the final three months. That would
likely leave growth for 2012 below 8 percent, its lowest in more
than a decade.
China's central bank cut interest rates twice in June and
July and has lowered the level of cash it requires banks to hold
as reserves three times since late 2011 as part of efforts to
support the economy.
Beijing is expected to further loosen interest rates and
reserve ratio policies through the end of the year, and has
invited private capital to help fund a raft of new or
fast-tracked infrastructure projects, but is unlikely to launch
a massive stimulus as it did in 2008 for fear of adding to a
pile of local government debt.
The construction sector in particular has been weakened by
credit curbs meant to halt property speculation. While there had
been signs of a slight pick-up in mid-summer, local efforts to
revive the vital sector were quashed by central government, and
the statistics bureau noted a clear slowdown in its construction
services index in September.
Air freight volumes - which can reflect just-in-time
overseas orders - have been negative year-on-year for all of
2012, as the eurozone crisis hurt Chinese exports.
Rail freight volume turned negative last month, for the
first time since 2009, while water and highway transport have
held up, according to Chinese official data provided by Standard