Service index suggests weak GDP recovery

NON-MANUFACTURING activities in private and export-oriented companies in China deteriorated again in October, indicating an economic recovery is still weak, according to an HSBC survey.

The Business Activity Index, a gauge of operating conditions in these companies in the service industry, fell to 53.5 last month from 54.3 in September, an HSBC report said yesterday. A reading above 50 signals expansion.

The lower reading signaled a slower pace of growth in service activities, the report said, noting outstanding business fell at the quickest pace in two years.

"Despite growth in service activity moderating, the Chinese economy is gradually bottoming out as earlier easing policies are filtering through and boosting domestic demand," said Qu Hongbin, chief economist for China and co-head of Asian economic research at HSBC.

"We expect the policy easing to continue to sustain the recovery in manufacturing in coming months, which should help support services and consumer spending to grow," Qu added.

The Chinese service firms were optimistic about the one-year business outlook, according to the survey.

In contrast, state-owned service enterprises saw their activities expand at a faster pace in October.

The non-manufacturing Purchasing Managers' Index, compiled by the China Federation of Logistics and Purchasing, rose to 55.5 in October from September's 53.7, boosted by higher employment and improved business expectations.

China's gross domestic product grew 7.4 percent year on year between July and September, the slowest in 14 quarters. But economists said China's economy had leveled out of its worst slump since the global financial crisis, as the growth in September exceeded market expectations and showed signs of stabilization.

Zhang Zhiwei, an economist at Nomura, said China's GDP will grow 7.9 percent or 8 percent in the fourth quarter.