By Lucy Hornby and Xiaoyi Shao
BEIJING (Reuters) – China’s official purchasing managers’ index (PMI) for the services sector fell to 55.6 in July from 56.7 in June as growth in new orders eased, although a construction services sub-index strengthened, the National Bureau of Statistics said on Friday.
The services sector index follows two PMI surveys of China’s vast manufacturing industry that showed smaller, private firms beginning to stabilise while larger, state-owned enterprises faced continuing pressure from unsold inventories and slowing growth.
“The index indicates the stable economy expansion in the non-manufacturing sector has not been changed,” Cai Jin, a vice president at the China Federation of Logistics and Purchasing, which conducts the survey on behalf of China’s National Bureau of Statistics.
Notably, a sub-index tracking the construction services industry rose by 2.3 points to 60.4, reflecting a loosening of the tight restrictions on China’s property developers that had reined in economic growth in the first half.
An index reading below 50 indicates activity is contracting and one above 50 signals expansion.
China’s fast-growing services industry has so far weathered the global slowdown much better than the factory sector, with the PMI consistently signalling healthy expansion and hitting a 10-month high of 58.0 in March.
Relatively strong readings of services PMIs reflect long-term optimism that China’s maturing economy will support more services and consumption.
China’s top leaders, President Hu Jintao and Premier Wen Jiabao, promised this week to step up policy “fine tuning” in the second half of the year to support the economy.
Beijing has cut interest rates twice and banks’ reserve requirements three times since November. Investors expect to see more, though few expect a full-blown stimulus package similar to the one launched during the global financial crisis of 2008/2009.
China’s economic growth has eased for six consecutive quarters as the country felt the chill of the euro zone debt crisis. However, a Reuters poll in July showed most economists estimate the slowdown bottomed out in the second quarter.
(Editing by Neil Fullick)