Business / Indepth

Service sector growth hits lowest level since 2008

(Agencies) Updated: 2014-02-04 04:20

Latest economic indicator adds to global market jitters

Service sector growth fell to a five-year low in January, an official survey showed, the second indicator in as many days that the world’s second-largest economy is facing headwinds. Global markets fell on Monday, in part due to concerns over the economy.

The National Bureau of Statistics said on Monday the official non-manufacturing Purchasing Managers’ Index (PMI) fell to 53.4 in January from December’s 54.6. A reading above 50 indicates growth, a reading below 50 indicates contraction

Monday’s reading was the lowest since December 2008.

On Saturday a key indicator of factory output growth hit a six-month low in January, hurt by weaker local and foreign demand, a survey showed.

The Purchasing Managers’ Index for the manufacturing sector edged down to 50.5 in January from December’s 51, the National Bureau of Statistics said on Saturday, though this was in line with market expectations.

Saturday’s PMI showed China’s factories saw fewer export orders and slacker growth in new orders last month. A sub-index for new orders fell to a six-month low of 50.9, and export orders slipped to 49.3, also a six-month low and below the 50-point threshold separating growth from contraction.

Analysts had cautioned before Saturday’s release that the ongoing Lunar New Year holiday, which began on Jan 31, probably dragged on factory output in January as manufacturers shut shop for China’s biggest annual holiday.

Global stocks were mostly sluggish or lower Monday, in part due to concerns over weakening growth in China.

In European trading, major benchmarks were lackluster. Britain’s FTSE 100 inched up 0.2 percent to 6,522.24 but France’s CAC-40 was down 0.1 percent to 4,163.23. Germany’s DAX fell 0.1 percent to 9,293.72. Futures augured modest gains on Wall Street, with Dow Jones and S&P 500 futures both up 0.1 percent.

The Nikkei 225, the barometer for the Tokyo Stock Exchange, closed down 2 percent at 14,619.13 as the yen has reversed some of its weakness against the dollar in recent days.

Seoul’s Kospi dropped 1.1 percent to 1,919.96. Among the Asian markets open for business, only Thailand posted gains after national elections took place Sunday without major violence.

Monday’s data showed moderating confidence among service providers, with the business expectations sub-index down to 58.1 from December’s 58.7, the lowest reading since February 2009.

Firms also drew slightly less business in January. A new orders sub-index nudged down to 50.9 from December’s 51.

Retailers and the air and rail transport sectors had strong months, with output sub-indices for all three above 60.

Slowing activity was accompanied by moderating price pressures. The sub-index for input prices fell to an eight-month low of 54.5, and the index for prices charged dropped to 50.1.

Analysts polled by Reuters expect China’s economy to grow 7.4 per cent in 2014, slightly slower than last year’s 7.7 per cent expansion and the weakest in 24 years.

The financial markets in several developing countries, including Turkey and Argentina, have been shaken recently by concerns that growth will slow and money will flow out of their economies as the US Federal Reserve tightens its monetary policy. That has knocked many stock markets, which were ripe for a pullback after big gains in 2013.

On Friday on Wall Street, the Dow Jones industrial average fell 149.76 points, or 0.9 percent, to 15,698.85. The S&P 500 dropped 11.60 points, or 0.7 percent, to 1,782.59 and the Nasdaq lost 19.25 points, or 0.5 percent, to 4,103.88.

Benchmark US crude for March delivery was down 51 cents at $96.98 a barrel in electronic trading on the New York Mercantile Exchange. The euro was little changed at $1.3480. The dollar rose to 102.12 yen from 101.96 yen late Friday but is down from about 105 yen at the beginning of the year.

Service sector growth hits lowest level since 2008 Service sector growth hits lowest level since 2008

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