China Non-manufacturing PMI Shows Slowdown Spreading

China's National Bureau of Statistics released its non-manufacturing Purchasing Managers Index for September which declined to a two-year low of 53.7, down from 56.3 in August. This is a clear indication that the slowdown seen in manufacturing activity is beginning to spread to the service sector. Construction activity was particularly weak as financial authorities sought to curb speculation in the property market by tightening credit. Demand for transportation services has also been weaker, reflecting slower growth both domestically and overseas. Reuters reports that air freight volumes have been down year-on-year every month during 2012. Rail freight volume turned negative for the first time in August although trucking and water-borne freight have continued to see growth. A widely followed PMI compiled by HSBC is due out tomorrow, which may confirm the apparent slowdown in China's services sector. In a related story, the Asian Development Bank (ADB) cut its 2012 GDP growth forecast for China from 8.5% to 7.7%—enviable by Western standards but well below the 9.3% reported in 2011. The new ADB forecast for 2013 is for 8.3% GDP growth. The ADB also pointed out that slower growth in China and India is having a negative impact on the growth of the smaller economies in Southeast Asia.