China's non-manufacturing PMI drops to 53.9 in June

BEIJING -- The purchasing managers' index (PMI) for China's non-manufacturing sector stood at 53.9 percent in June, down from 54.3 percent in May, according to official data released on Wednesday.

A PMI reading above 50 percent indicates expansion, while a reading below 50 percent indicates contraction. The statistics were jointly released by the National Bureau of Statistics and the China Federation of Logistics and Purchasing (CFLP).

Cai Jin, vice-chairman of the China Federation of Logistics and Purchasing, said that the small slip in June is mainly because of seasonal factors in construction.

The PMI for the construction sector dropped 2.9 percentage points to 59.3 percent in June, according to the CFLP statement.

In the service sector, the sub-indices for business activity and new orders both ended two consecutive monthly decreases, rising to 52.6 percent and 49.9 percent, respectively.

Service industries, including express mail service, Internet information, telecommunications, environmental protection and public facilities management, all recorded a business activity PMI of more than 58 percent in June, according to Cai.

An increasingly active service sector accounted for the steady growth in June's non-manufacturing activity and is an example of the positive effects of China's economic restructuring, the federation said in the statement.

The sub-index for employment in the non-manufacturing sector moved up to 51.5 percent in June, staying above 51 percent for a third straight month.

A separate survey from HSBC Holdings showed a modest increase in service business activity, as the sector's PMI rose slightly to 51.3 in June from 51.2 in May.

But Qu Hongbin, the chief China economist at HSBC, predicted that the underlying growth momentum in the service industry is likely to soften, along with a slowdown in manufacturing growth.

"With sluggish growth of new orders, employment growth is under pressure," said Qu. "As the value-added tax reforms are likely to take their time to filter through, we expect slower growth in service sectors in the coming months."