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Global private-sector growth accelerates

Global private-sector growth accelerates

Write: Jason [2011-06-14]

Global private-sector growth accelerates

A worker at a private photoelectrics company in Ningbo, Zhejiang province. China's private economy has become a mainstay of the national economy. [Photo / China Daily]

LONDON - The world's private-sector economy expanded at a slightly faster pace in May, with companies in the emerging powers of China, Brazil and Russia leading the way, a recent business survey showed.

JPMorgan's Global All-Industry Output Index, which is based on the results of purchasing managers' surveys of thousands of companies worldwide, rose to 52.6 in May, up from April's 21-month low of 51.8. May was the 22nd month that the index has been above the 50 mark that signifies growth.

"The growth of the global economy showed a slight improvement in May, although this mainly reflected a slight bounce in the service sector following March's sharp easing," said David Hensley from the survey's compiler.

"The underlying trend remains consistent with the recovery entering a softer growth phase, especially as manufacturing slowed further."

The global services PMI also picked up slightly, to 52.5 in May from April's 51.0, which was also a 21-month low. JPMorgan said the acceleration was mainly the result of stronger growth in China.

"Job creation was sustained for the eleventh month running, but cost inflation failed to show as substantial an easing as that seen at manufacturers," said Hensley.

Purchasing managers' indexes from individual countries showed mixed performances. While growth picked up among service-sector companies in the United States, it sagged in the eurozone for the second month in a row.

In China, the index dropped to 52 in May from 52.9 in April, the second consecutive month of decline.

By the end of 2010, China's private sector included more than 8.4 million enterprises, accounting for 74 percent of all the country's businesses. The number of private enterprises is rising at an annual 14.3 percent, according to the All-China Federation of Industry and Commerce.

The State issued two major rules, in 2005 and 2010, to encourage faster development of the private sector.

In China's latest move to encourage the growth of the private sector, the banking regulator on Tuesday announced a number of favorable policies for lenders to offer more loans to small-scale enterprises, mostly privately-owned.

The regulator said that the move is designed to reduce the financial pressure on smaller businesses as the nation tightens its monetary stance in its fight against inflation. Many private companies have found it difficult to secure bank loans.

A lower risk-weighting will be applied when calculating the capital-adequacy ratio for loans of less than 5 million yuan ($772,000) to each individual small enterprise, according to the new rule.

Reuters