Business / Industries

Optimistic outlooks give cheer to services sector

By Chen Jia (China Daily) Updated: 2012-11-06 10:13

China's services industry continued to expand in October, despite a slightly slower growth rate than it had in September, encouraging company executives to remain optimism about the economic outlook and their own expansion policies.

The latest HSBC Purchasing Managers Index for China's services sector, released on Monday, slipped to 53.5 in October from September's four-month high of 54.3, as higher costs and greater competition squeezed margins.

But analysts said the figures still signaled that industrial development was in line with the overall rebound in manufacturing, which continues to support overall economic recovery.

Qu Hongbin, the chief economist in China with HSBC Holdings, said although the growth might have moderated last month, the country's economy is "gradually bottoming out" as earlier easing policies take effect. He said he expected the expansionary measures to continue to lend support to a growth in services and consumer spending.

Nearly 31 percent of respondents for the HSBC services PMI expected their business activities to increase over the next year, while just 7 percent anticipated a decrease, the bank reported.

The HSBC result came two days after the official non-manufacturing PMI released by the National Bureau of Statistics, which showed a reading that improved to 55.5 in October from September's 53.7 which was the slowest growth since December 2011.

Cai Jin, vice-chairman of the China Federation of Logistics & Purchasing, said he viewed the non-manufacturing business expansion as proof of steady growth.

"The impact of action aimed at boosting domestic demand has become more apparent and has bolstered market confidence," he said.

Economists said that rebounds in both the official and the HSBC indicators in October represented a considerable boost to business manager confidence in coming quarters.

Yao Wei, an economist at Societe Generale in Hong Kong, said: "We expect China's industrial production growth to show another uptick in October, to 9.4 percent year-on-year from 9.1 percent in September, echoing the continued improvement in the latest PMI reports."

She added the recovery would be driven mainly by infrastructure investment, especially in transportation.

The People's Bank of China said on Friday it planned to continue its existing monetary policies and "strengthen policy fine-tuning" to further consolidate growth in the fourth quarter.

Zhang Zhiwei, the Chinese chief economist with Nomura Securities Co Ltd, said: "The central bank suggests policy easing will continue and may even pick up speed.

"Inflation may not constrain PBOC policy easing in the fourth quarter. However, if it rises in 2013, the central bank may need to quickly shift its policy toward neutral or tightening."

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