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China’s Services PMI Improves – But not Conclusively

Last week there were strong indications of the US economic recovery gathering speed. This week it seems that the world’s second largest economy could also be taking important steps forward.

According to recently released data compiled by the China Federation of Logistics and Purchasing and the National Bureau of Statistics China’s non-manufacturing industries enjoyed a significant rebound in October.

After September’s figures showed the slowest expansion for almost 20 months, October recorded an impressive increase with the Services purchasing managers’ index climbing from 53.7 to 55.5.

This services growth, when viewed in conjunction with the optimistic manufacturing data of recent days, lessons the necessity of further stimulus methods and eases some of the pressure on the soon-to-change Chinese government.

Huang Yipping, a chief economist with Barclays Plc, commented: ‘Investors expecting a big stimulus package after the Party Congress will likely be disappointed, although the new leaders will probably introduce some new projects. [Current indicators] suggest that even today, growth is probably not significantly below its potential.’

Meanwhile, a vice chairman with the logistics federation released an upbeat statement with the figures. Cai Jin asserted: ‘The impact of action to boost domestic demand has become more apparent and has bolstered market confidence. [This expansion] will help consolidate the foundation for steady growth’.

However, increased confidence in China’s economic circumstances may prove premature as a separate services index released today revealed less positive results than the report discussed above.

Statistics compiled by Markit Economics and HSBC Holdings Plc registered the services figure dropping rather than rising, falling from 54.3 to 53.5.

Although all eyes are focused on the climax of the US presidential elections China is due to undergo it’s once in a decade leadership change in the days ahead as well and investors aren’t the only ones anxiously awaiting  the effect of the political shake up global economic recovery.

As of 10:55 am

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