Services PMI decreases to 16-months low

China’s services Purchasing Managers’ Index retreated to 51.7 in December from 52.1 in November, its lowest level in 16 months, HSBC Holdings Plc said on Friday.

However, some sub-indexes have shown stronger fundamentals due to a rebound of the business activities in the sector, including the sustained increase of new business inflows and accelerated employment growth, the Hong Kong-based bank said.

A reading above 50 means expansion in the services sector, while a figure below 50 indicates contraction.

The sub-index that shows new business activity rose to 52.4 in December, compared with 52.2 in November. The December employment sub-index increased to a two-year high of 54.1 from 51.4 in November.

Despite the moderation of the services PMI, the underlying strength of the services sector has improved, said Qu Hongbin, the chief China economist with the bank.

“Together with the further pick-up of manufacturing growth, it suggests that China is on track for achieving around 8 percent year-on-year GDP growth recovery in the fourth quarter of 2012,” Qu said.

The National Bureau of Statistics and the China Federation of Logistics and Purchasing also released the official figure for the December non-manufacturing PMI, which rose to a four-month high of 56.1 from November’s 55.6, a result of increasing domestic market demand and exports.