Slowdown hits Chinas services sector

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Chinas services sector is growing at its slowest pace in the last four months, adding concerns that efforts to tame inflation are curbing growth in the worlds second biggest economy. Chinas Federation of Logistics and Purchasing said a purchasing managers index has dropped to 57 from 61.9, in the month of May.

“Although from April it has kept dropping, the index level still shows China’s non-manufacturing industries are maintaining quite quick growth. Affordable housing construction has accelerated.” The government’s drive to build 10 million low-income housing units this year has increased demand for housing and building industries, Cai said. The Communist Party is boosting investment in affordable housing to counter a slump in manufacturing growth. Priemer Wen Jiabao had set the target to build 36 million social housing units during the next five years, according to an online interview.

Usually a reading above 50 indicates an expansion but the manufacturing index fell in June to the lowest level in 28 months as export orders and output grew at a slower pace. The slowdown in manufacturing is causing a reaction in producers services too.

Sources: Economic Times; Bloomberg

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