Economic recovery buoys building and service sectors

China's nonmanufacturing industries gained stronger growth momentum in March, supported by an accelerating economic recovery.

The nonmanufacturing purchasing managers' index, an indicator that reflects the business activities in the construction and service sectors, bounced back to 55.6 in March, according to the National Bureau of Statistics and the China Federation of Logistics and Purchasing on Wednesday. It was 54.5 in February and 56.2 in January.

A PMI above 50 means expansion, as opposed to contraction. The survey covers 1,200 enterprises.

Overall new orders increased 0.2 points to 52 percent month-on-month, and new export orders improved to 51.7 from 51.6, indicating stronger demand from both domestic and overseas markets, said Cai Jin, vice-chairman of the CFLP.

Input prices dropped to 55.3, 0.9 points less than in February, suggesting an easing of inflation pressure, the analyst said.

It is a signal of a strengthened growth impetus for the whole economy, along with the raised manufacturing PMI released on Monday, he said.

The March manufacturing PMI, which reflects factory production, rebounded to 50.9 from 50.1 in February.

The construction industry PMI rose to 62.5, up by 4.5 points from a month earlier and a 12-month high, as most migrant workers returned to cities to resume construction projects after the Spring Festival holiday in February.

"It suggests that construction enterprises have more positive expectations for the market situation this year," Cai said.

The service industry PMI slightly declined to 53.6 from February's 54.9. Business volumes for catering, retail, air transport and road transport industries shrank in March, said an NBS statement.

HSBC Holdings PLC reported a service industry PMI on Wednesday based on a separate survey. It registered a six-month high of 54.3 in March, up from 52.1 in February, because of the rebound of new business orders and employment.

The sub-index that shows the development expectations of enterprise executives also jumped to 65, a 10-month high, HSBC said.

"This improvement, alongside a rebound in manufacturing activity growth, suggests a broad-based but gradual growth recovery is on its way," said Qu Hongbin, chief economist in China for HSBC.

The ongoing recovery has improved the labor market, as the sub-index from the HSBC survey recorded the fourth consecutive month of modest expansion of employment. "It can stimulate more consumer consumption in the coming quarters to drive up the whole growth," Qu said.

Economic growth in the first quarter will be seen in the indicators released by the NBS on April 15, including GDP growth rate, industrial production, fixed-asset investment and consumer goods retail.

Wang Tao, chief Chinese economist for UBS AG, said on Wednesday that signals show economic activity has continued to recover, although momentum is weaker than expected.

Consumer inflation in March has likely dropped after the Chinese New Year to 2.5 percent year-on-year from 3.2 percent in February, while the producer price index may fall more due to the downward trend of raw material prices, Wang said.