New economic figures show service sector growth

09:04, January 04, 2011      

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December economic data released over the weekend showed growth in the service sector but a slide in manufacturing, reflecting inflation concerns and a slowdown of the overall economy.

The December non-manufacturing commercial activity index was 56.5 percent, up 3.3 percentage points over November's reading, mainly driven by faster growth of the information service sector, according to the China Federation of Logistics and Pur-chasing's figures released Monday.

But the Purchasing Managers Index (PMI), an indicator of manufacturing activity, was down 1.3 percentage points from November to 53.9 percent in December, after four consecutive months of slight growth.

The sliding PMI reading was mainly due to a slump in new domestic orders based on federation data published Saturday.

A PMI of more than 50 represents expansion of the manufacturing sector, compared to the previous month. The domestic new order sub-index reading of the PMI was 55.4 percent in December, down 2.9 percentage points from November's 58.3 percent.

One reason for the reduction in new domestic orders might be a response to inflation, as producers tend to take less new orders and hold more raw materials and finished products in their warehouses expecting higher prices in the future, said Lu Zhengwei, senior economist of Shanghai-based Industrial Bank.

The Consumer Price Index, a gauge of inflation, hit a new high of 5.1 percent in November, making 2010 CPI highly likely to surpass the 3-percent growth target set for last year.

Shanghai-based Industrial Bank's Lu believes that the unprecedented money supply over the past two years is the major cause of the inflation — some 9.6 trillion yuan ($1.45 trillion) in new lending was handed out in 2009 and that figure is fore-cast to some 8 trillion yuan ($1.21 trillion) for 2010.

Source: Global Times
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