China's June Official Services PMI Up To 3-Month High

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(Reuters) -- China's services sector expanded at its fastest pace in three months in June, an official survey showed on Tuesday, but left intact market expectations that Beijing will deliver more policy measures to support growth in the near future.

The latest survey by the National Bureau of Statistics and the China Federation of Logistics and Purchasing (CFLP) showed the purchasing managers' index for the country's non-manufacturing sector rose to 56.7 from 55.2 in May, the best reading since a 10-month high of 58.0 recorded in March.

A reading above 50 indicates expanding activity and one below 50 signals contraction, according to the survey methodology.

The reading from the services sector follows two PMI surveys of China's vast manufacturing industry showing factory activity fell to a seven-month low in June, dampened by both external and domestic weakness.

China's fast-growing services industry, which accounts for about 43 percent of output in the world's Number 2 economy, has so far weathered the global slowdown much better than the factory sector.

The index shows stable and steady growth momentum of China's services sector. Taking the official PMI indexes under consideration, they all indicate that China's current economic growth shows signs of stabilizing, Cai Jin, a vice president at the CFLP, said in a statement accompanying the index.

China's official manufacturing PMI for June confounded market expectations of slippage into contractionary territory and clung to an expansionary reading of 50.2 when it was published on July 1 - albeit at a seven month low.

A sub-index measuring new orders for the services sector rose to 53.7 in June from May's 52.5, t he highest level so far this year, according to CFLP's Cai.

The input price sub-index fell to 52.1 in June from 53.6 in May, while prices charged held below 50 f or the second straight month, at 48.6 versus May's 48.5.

Easing price pressures provides more room to ease monetary policy without igniting inflation - a key worry for policymakers in Beijing obsessed with managing the impact of costs on social stability.

Economists and traders expect the central bank to move soon to cut the required reserve ratio (RRR) for banks again, and many think another cut to borrowing rates is also possible later this year.

China has lowered RRR in three 50-basis point steps since November 2011, freeing up an estimated 1.2 trillion yuan ($190 billion) for fresh lending. It cut benchmark interest rates by 25 bps in early June to 6.31 percent in a surprise move - its first cut since the depths of the global financial crisis.

On the fiscal front, Beijing has fast-tracked investment projects and rolled out new incentives to spur consumer spending on energy-efficient products. (Reporting by Beijing Economics Team; Editing by Nick Edwards)

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