PMI shows service sector expanding

Updated: 2012-06-05 14:48

By Chen Jia (

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The Chinese service sector expanded the most in 19 months in May with the industry's Purchasing Management Index increasing the sharpest since October 2011 to 54.7, HSBC Holdings Plc said on Tuesday.

The figure increased from 54.1 in April, boosted by the fast growth in output of new business and services. "The release should alleviate ongoing market fears of a sharp slowdown in China," a statement from the Hong Kong-based bank said.

The sub-index that shows the expansion of new business rose to 54.7, the highest level since October 2010, from 54.5 in April. Meanwhile, business expectations remained high at 65.1, compared with the first quarter's average of 63.8, according to HSBC.

Two main reasons may have supported the faster expansion: a notable rebound of property market transactions and improving consumer confidence as inflation eases, the statement said.

Qu Hongbin, chief economist in China with HSBC bank, said: "The expected fast delivery of a mixture of supportive measures should filter through to further boost services output and employment."

China's official May non-manufacturing PMI was released on Sunday, showing a slight fall to 55.2 from 56.1 in April. It indicated the sector's business activities were growing at a slower pace but were still above the critical 50 level.

A PMI figure above 50 means expansion while below 50 indicates contraction.