January 5, 2012 / 2:35 AM / 8 years ago

HSBC China services PMI steady at 52.5 in December

BEIJING, Jan 5 (Reuters) - China’s services sector entered a seventh straight year of expansion in December, a survey of purchasing managers showed on Thursday, but the world’s second-biggest economy saw overall levels of activity mired at three-month lows.

The HSBC China services purchasing managers index (PMI) stood at 52.5 in December, unchanged from November, signalling a steady if sluggish expansion in the sector that is increasingly a barometer for domestic economic conditions.

“Unmoved on November’s three-month low, the service sector PMI pointed to subdued growth momentum,” Qu Hongbin, chief economist for China and co-head of Asian economic research at HSBC said in a statement accompanying the index.

That said, it was the 74th straight month that the index had read above 50 — the level that demarcates expansion from contraction. The index has been above 50 every month since the survey started in November 2005.

The steady state of the HSBC index, compiled by UK-based data provider Markit, will reinforce the views of some investors that China’s economic slowdown will be modest and short-lived.

A solid rebound in the official services PMI earlier this week followed on from a gentle bounce in manufacturing activity in both official and private sector surveys.

The index at 52.5 remains above Q1 2011 levels when Chinese monetary tightening was in full swing, dampening both domestic inflation and economic activity.

Sub-indexes of prices charged and outstanding business edged below 50, although both gave readings consistent with the history of the survey — respondents appear to have an entrenched view that they have limited pricing power and insufficient work outstanding.

Business expectations fell to the lowest in the services PMI’s history — though that sub-index remains far and away the most robust element of the overall survey — and were a clear signal to HSBC of the need for policy action to support economic growth in the months ahead.

“More headwinds are down the road due to the still weak manufacturing sector, slower jobs growth, the ongoing property correction and cooling external demand. All these factors call for more aggressive easing measures,” Qu said.

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