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Sep 05, 2012, 04.13 PM IST
Asia's services sector expanded in August despite a global economic downturn, business surveys showed on Wednesday, but optimism remained muted as regional economies toil to overcome the deepening impact of the festering euro zone crisis.
The HSBC services sector Purchasing Managers' Index (PMI) has remained above the 50-mark, which separates growth from contraction, in both China and India for months now, even as demand from Europe continues to wane.
Manufacturing PMI surveys earlier this week had painted a far gloomier picture, revealing a contraction in Asia's factory sector spread in August as new export orders fell across the region.
In China the services index stood at 52.0 in August, which, although a one-year low, showed the sector continued to grow. In India the sector expanded at its fastest pace in six months with the index at 55.0.
"Broadly speaking we still see Asia as quite resilient. Asia overall still benefits from quite strong fundamentals. It also has, in many cases, policy room to counter external headwinds," said Leif Eskesen, chief India and ASEAN economist at HSBC.
"In China's case this is something that will help prop up growth. More importantly domestic sources of growth are generally quite strong within the region."
Services PMI data for the euro zone, to be released later today, will likely suggest the region is headed for its second recession in three years, which would further hurt China, which counts Europe as its single biggest export market.
Firms in China hired more workers at higher wages in August, a sign that they expected conditions to improve in the future.
In India, the new business sub-index rose to a six-month high of 55.9 in August and optimism about future business remained high.
But confidence in the region was in short supply as overall the data from China was less upbeat.
The new business sub-index indicated the slowest rate of expansion since August 2011 and dragged down the main index, which does not bode well in an economy where services account for about 43 percent of gross domestic product.
"As far as global economic headwinds (are concerned), we are not out of the woods yet. There are still significant downside risks to the outlook in Europe," said HSBC's Eskesen.
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