China's services industry expanded at its fastest pace for 19 months in May, with new business and optimism about the future robust, according to a private-sector survey of purchasing managers published on Tuesday. The outcome is a stark contrast to May surveys of China's manufacturing sector, which betrayed signs of a broadening economic slowdown and pointed towards further policy efforts from Beijing to support growth.
The HSBC China Services Purchasing Managers Index (PMI) rose to 54.7 in May, extending from April's six-month peak of 54.1. The survey's compiler, Markit, cited new business growth as the key driver of the index. Services make up about 43 percent of economic activity. "This should reduce the fears of a sharp growth slowdown. Going forward, the expected fast delivery of a mix of supportive measures should filter through to further boost services output and employment," Qu Hongbin, chief China economist at HSBC, the survey sponsor, said in a statement accompanying the index.
The increase in the HSBC Services PMI comes in marked contrast to China's official non-manufacturing PMI, which showed a second straight monthly decline when it was published at the weekend, easing to 55.2 from April's reading of 56.1.
The difference is a result of using differing methodologies and samples. Still, both are above the 50-mark, which divides expansion from contraction. Their relatively robust readings, particularly compared to the findings of PMI surveys on manufacturing, also reflect the long-term optimism of businesses benefiting from a gradual rebalancing of activity towards services and consumption.
The vast factory sector paints a different picture of the economy. The official and HSBC PMI surveys last week signalled deeper-than-forecast deterioration in demand at home and abroad, underlining recent official concerns that growth is slowing down.
The official purchasing managers' index - covering China's biggest, mainly state-backed manufacturers - fell more than expected to 50.4 in May. It was the weakest reading this year and down from April's 13-month high, with output at its lowest since November 2011.
The HSBC China manufacturing PMI, tracking smaller private-sector firms, retreated to 48.4 from 49.3 in April - its seventh straight month below 50. The employment sub-index fell to 48.1, its lowest level since March 2009.
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