Rapid service sector gains persist

New orders, employment climb in HSBC-Markit survey for June

BEIJING – China’s service industries expanded at the second-fastest pace this year as new orders and employment climbed, supporting growth amid the Chinese government’s campaign to cool inflation.

The purchasing managers index was 54.1 in June compared with 54.3 in May, HSBC Holdings PLC and Markit Economics said in a statement on Tuesday. A reading above 50 indicates expansion.

“The continuous steady expansion of the service sector, in particular the notable improvement in employment, should lend support to economic growth,” HSBC’s chief China economist Qu Hongbin said in the statement.

“This should provide room for Beijing to maintain the current tightening measures for another two to three months to slow inflation meaningfully into the fourth quarter.”

Consumer prices could have jumped by more than 6 percent in June from a year earlier, the central bank-backed Financial News said in an editorial on its front page on Tuesday, in line with forecasts from economists including UBS AG’s Wang Tao and Peng Wensheng at China International Capital Corp.

Inflation accelerated to 5.5 percent in May, the biggest gain in almost three years.

Price increases have been driven by surging food costs, especially pork, which rose 20 percent this year through June 10 to the highest since April 2008, according to data from Ministry of Commerce.

The HSBC China Services PMI is based on data compiled from monthly replies to questionnaires which sent to purchasing executives in more than 400 privately owned service-sector companies.

New orders climbed to an eight-month high and the rate of job creation was the highest this year, HSBC said. The increase in input costs was the fastest since November with higher salaries cited as the main driver.

Business confidence fell to the lowest since the survey was first compiled in November 2005 and competitive pressure prevented Chinese companies from passing on all cost increases to customers, HSBC said.

A separate non-manufacturing PMI for June compiled by the Federation of Logistics and Purchasing released on Sunday declined to 57 from 61.9, the slowest expansion in four months.

Source: Bloomberg News

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