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Asia Economy Last Updated: Jan 6, 2014 - 5:46 AM

China's services sector slowed in December; Services in India contracted
By Finfacts Team
Jan 6, 2014 - 5:29 AM

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China's services sector slowed in December while services in India contracted at the end of 2013, according to reports issued Monday.

Chinese service firms reported increased business activity in December. However, the rate of growth eased to a marginal pace that was the weakest since August 2011. The latter was signalled by the HSBC China Services Business Activity Index posting at 50.9 in December, down from 52.5 in November.

Hongbin Qu, chief economist, China & Co-Head of Asian Economic Research at HSBC said: “Despite the moderation of the headline China Services PMI (purchasing managers' index), which reflected slower new business growth, labour market conditions improved for the fourth month in a row. We expect the steady expansion of manufacturing sectors to lend support to service sector growth. Moreover, the implementation of reforms such as lowering the entry barriers for private business in service sectors and the expanded VAT reforms should help to revitalise service sectors in the year ahead.”

In India, adjusted for seasonal factors, the HSBC Services Business Activity Index fell from 47.2 in November to 46.7 in the latest month, indicating a solid and accelerated rate of contraction. Moreover, this was the sixth consecutive monthly drop in output levels, which is the longest period of continuous reduction since the 2008/2009 global financial crisis.

Underpinning the latest fall in services output was a solid decrease in incoming new work. New business contracted at the quickest pace since September, with panellists reporting an increasingly fragile economy and competitive pressures. There were a few mentions that the upcoming elections had also contributed to the latest drop in new orders. Across the private sector as a whole, new business decreased at a faster, but moderate pace.

Four of the six broad areas of the service economy registered lower output volumes, while new business contracted in five categories. As with the trend for output, the sharpest decline in new orders was noted at Hotels & Restaurants. The Post & Telecommunication sub-sector remained resilient, with growth of both business activity and new orders recorded.

Commenting on the India Services PMI survey, Leif Eskesen, chief economist for India & ASEAN at HSBC said: “The service sector continues to face head winds, with weakening new business dragging down activity. On a positive note, inflation pressures are easing."

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