Construction drives China March services PMI higher

Rises to 55.6 in March from 54.5 in Feb, adding to signs of a modest uptick in world's second-largest economy

China's official purchasing managers' index (PMI) for the non-manufacturing sector rose to 55.6 in March from 54.5 in February, adding to signs of a modest uptick in the world's second-largest economy.

The move higher was driven by activity in the construction sector, whose sub-index jumped 4.5 points from February to 62.5 in March, according to the survey from the National Bureau of Statistics.

The construction industry has been a major beneficiary of government infrastructure spending, with about $150 billion worth of projects given the green light in 2012 as part of an effort to engineer a rebound in economic activity as GDP growth slowed last year to a 13-year low of 7.8%.

But the recovery's broadly mild nature was evident in overall new orders in the services sector, which nudged up just 0.2 index points to 52.0 in March from February.

A PMI reading above 50 indicates activity is accelerating, while one below 50 indicates it is slowing.

A rise in new orders was broadly evident across multiple service industries, the NBS statement said.

"The Internet and software information industry, the hotel industry, telecommunications, broadcasting, television and satellite transmission services, retailing and real estate industries all saw new orders staying above the 50 point level, suggesting a growing market demand," the statement said.

New orders for the catering, logistics and transportation industries fared less well, dipping below the 50 point level and suggesting a slow down in activity.

Catering services have been under pressure since the government launched an internal austerity drive at the end of last year, designed to cut down excessive banqueting and gift-giving that is often linked to corruption.

The services sector index followed the bureau's manufacturing PMI on Monday which missed market expectations despite climbing to an 11-month high in March, underscoring that the economy is making only a mild recovery from its weakest year of growth since 1999.

China's services industry has so far weathered the global slowdown much better than the factory sector.

Growth in China's increasingly important services sector had expanded at its slowest pace in five months in February, although environmental protection and retail maintained robust growth, with their sub-indices hovering over 60.

All of which point to a firming of domestic demand that was also detected in Monday's manufacturing sector surveys. Domestic demand was the key factor driving a rebound in factory activity in March.

Most analysts expect China's economy to enjoy a steady but gentle recovery this year, with infrastructure investment and household consumption helping compensate for softening demand for Chinese exports.