The services sectors in emerging powerhouses China and India grew in July at a healthy pace, providing vital support as their manufacturing sectors struggle with the global downturn.
China’s official purchasing managers’ index (PMI) for the services sector fell to 55.6 in July from 56.7 in June, while its HSBC PMI headed in the opposite direction, rising to 53.1 from a 10-month low of 52.3 in June.India’s non-manufacturing PMI from HSBC was little changed, slipping to 54.2 in July from 54.3 in June.
With all the PMIs above 50 — a threshold that divides expansion from contraction — the surveys signal that both services sectors are expanding.
However, HSBC’s India manufacturing PMI for July fell to 52.9 from 55.0. It also showed overseas orders for Indian goods fell for the first time in nine months, reflecting the drag on global demand that is hitting all of Asia’s exporters. Similarly, two surveys this week on China’s manufacturing industry showed PMI readings around 50. Combined, they signalled that growth was stalling or close to stalling for a sector that has been the Chinese economy’s backbone so far.
Just as it is India’s service sector that clearly is providing some encouragement, so it is also China’s growing services sector that has so far weathered the downturn far better than it’s vast factory sector.
“Service sector activity grew at a steady pace in July, with growth in new orders and employment holding up,”said Leif Eskesen, an economist at HSBC, on India’s services PMI.
“The index indicates the stable economy expansion in the non-manufacturing sector has not changed,” said Cai Jin, a vice president at the China Federation of Logistics and Purchasing (CFLP), which conducts the official survey on behalf of China’s National Bureau of Statistics.
Notably, the construction services sub-index rose by 2.3 points to 60.4 in the PMI, indicating strong growth and a loosening of the tight restrictions on developers that reined in growth in the first half of 2012.