Growth in China's services sector weakened slightly in September as new business cooled, a private survey showed today, reinforcing signs of a slowdown in the world's second-largest economy that could prompt more stimulus measures.
The services purchasing managers' index (PMI) compiled by HSBC/Markit pulled back to 53.5 in September from a 17-month high of 54.1 in August.
A reading above 50 in PMI surveys indicates an expansion in activity while one below that threshold points to a contraction.
A sub-index measuring new business fell to 53.2 in September from a 19-month high of 53.9 in August, but sub-indexes measuring employment and outstanding business both inched up, painting a mixed picture.
"Overall, the services sector held up in September, despite the downward pressure seen in the manufacturing sector. We think risks to growth in the near term are still on the downside, and warrant accommodative monetary as well as fiscal policies," said Qu Hongbin, chief China economist at HSBC.
An official survey released last week showed that the services sector grew at its slowest pace in eight months in September after new orders shrank for the first time since the 2008 global financial crisis, exposing more weakness in the world's second-largest economy.
The services sector made up 46.1% of gross domestic product in 2013, surpassing the secondary sector - manufacturing and construction - for the first time, as the government aims to create more jobs and boost domestic consumption.
Last week, two surveys showed China's manufacturing sector held up in September but remained subdued in a sign that the economy is still struggling to recover its growth momentum - despite recent policy support.
Steps unveiled since April included reserve requirement cuts for selected banks and faster investment in railways and public housing.
But much of their broader impact may have been offset by a cooling property market and tighter credit as banks grow more cautious about lending as the economy cools.
In a bid to avert a deeper slide in the housing market, China's central bank and banking regulator relaxed lending rules for second-home buyers on September 30 by giving them a 30% discount on mortgage rates and cutting their down payment levels to 30% from 60-70%.
China's central bank said over the weekend it will use various monetary tools to maintain adequate liquidity and reasonable growth in credit and social financing.
Analysts expect more policy measures will be needed to help achieve the government's growth target of around 7.5% this year, although any dramatic stimulus looks unlikely as reform-minded top leaders have shown greater tolerance for slower growth.
The Chinese economy expanded by 7.5% in the second quarter on-year.
