China’s services sector booms as economy revives

China's services sector registered increased activity at its fastest pace in 15 months in June, according to a private survey, reinforcing signs of a stabilising broader economy, Reuters reports.

The services purchasing managers' index (PMI) compiled by HSBC/Markit rebounded to 53.1 in June from 50.7 in May, well above the 50-point level separating expansion in activity from contraction.

According to Qu Hongbin, chief economist for China at HSBC, the expansion in the service sector reinforced the recovery seen in the manufacturing sector, and signaled a broad-based improvement over the month, the report said.

He added, the economy was expected to slowly turn around and the recovery would remain supported by accommodative policies on both the fiscal and monetary fronts over the coming months.

In a sign that the domestic economy was regaining some internal strength, a sub-index measuring new business was up at 53.8 in June, the strongest expansion since January 2013.

Government data on the services sector released earlier in the day also showed continued strong expansion, even as the pace of growth slowed slightly to 55 for June from 55.5 in May.

The findings come after upbeat readings from similar factory activity surveys earlier in the week, signs that showed the world's second-largest economy was steadying as a flurry of government stimulus measures started kicking in.

According to Macquire Group economist Larry Hu, in the short term, economic growth had stabilised but it was still a weak recovery. He added the improvement was largely driven by the government's stimulus measures and he expect them to keep rolling out more easing measures in the second half, MarketWatch reported.

The slowdown in growth, earlier this year forced the government to initiate measures to spur the economy, particularly by getting credit flowing to small businesses and rural areas.

The targeted stimulus, was however failing to revive the real-estate sector, saddled with oversupply.

When related industries such as steel and construction are included, the property sector accounted for well over 20 per cent of China's gross domestic product, according to analysts. Land sales in 300 cities were down 29 per cent year-over-year in the second quarter to 247.7 million square meters, according to data provider China Real Estate Index System.

China's economy in the first quarter grew 7.4 per cent on an annual basis--its lowest level in 18 months as against 7.7 per cent in the final quarter of 2013.