Non-manufacturing PMI rebounds despite real estate slowdown

China's non-manufacturing activity slightly recovered in August as tertiary industry saw robust growth and market outlook remained optimistic, official data suggested on Wednesday.

The purchasing managers' index (PMI) of the non-manufacturing sector rebounded to 54.4 percent last month, data compiled by the National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing (CFLP) said.

The reading reversed the losing streak since June and continued to stay above the 50-threshold that demarcates expansion and contraction. China's non-manufacturing PMI had slipped to 54.2 percent in July, marking a six-month low.

The official non-manufacturing PMI tracks business activity in sectors including construction, software, aviation, railways and real estate.

Business activity in the tertiary sector accelerated moderately, with its index rising 0.4 percentage points from July to stand at 53.6 percent. Transport, postal services and public facility management were well above the 50-mark.

The sector's new order index increased to 50.6 percent, slightly up from the previous month. Market demand for travel by air and train, software and telecommunications grew.

However, business activity in the construction sector began to slow down, with its index retreating to 57.7 percent. Its new order index dropped a substantial 4.1 percentage points to 47.5 percent, below the 50-threshold and indicating shrinking demand.

Cai Jin, deputy head of the CFLP, said China's overall non-manufacturing activity registered a mild and stable growth. He noted the satisfactory performance of the tertiary sector and predicted it would continue rising in the next few months.

Cai suggested that close attention needs to be paid to the construction sector, as its new order index for August dropped to a record low, weighed down by weak investment.

Both business activity and new order indices of the real estate sector slipped below the expansion-contraction line, indicating the once-heated sector is struggling.

Cai said it is likely that there will continue to be a low level of business activity in property in the short term.

In July, new home prices in 64 of 70 major Chinese cities tracked by the NBS dropped month-on-month, sending out new signs of cooling in the property market.

The index for business outlook retreated 0.3 percentage points from last month but still stood at the high level of 61.2 percent, suggesting non-manufacturing businesses had positive expectations for the next three months.

A separate survey compiled by HSBC jumped to 54.1 in August, the strongest in 17 months, from a nine-year low of 50 in July.