BEIJING, June 30 (Reuters) - China's manufacturing

activity fell for a second month in June while services activity

slipped to a five-month low, an official survey showed on

Sunday, keeping alive calls for further stimulus as the economy

struggles to get back on its feet.

The National Bureau of Statistics (NBS) purchasing managers'

index (PMI), at 49.5 in June, was unchanged from May, below the

50-mark separating growth from contraction and in line with a

median forecast of 49.5 in a Reuters poll.

"Actual industrial activity should be stronger than the data

suggests as our observation is that the official PMI fails to

fully capture the current export momentum, which has been the

major economic driver this year," said Xu Tianchen, senior

economist at the Economist Intelligence Unit.

Still, Xu added that external and domestic demand remains

relatively inadequate to absorb China's manufacturing capacity

and this will prevent a recovery in producer prices.

While a sub-index of production was above 50 in June, other

indexes of new orders, raw material stocks, employment, supplier

delivery times and new export orders were all in contractionary

territory, the NBS survey showed.

China's exports exceeded forecasts in May, but analysts

said the jury is still out on whether export sales are

sustainable given growing trade tension between Beijing and

Western economies. Meanwhile, a protracted property crisis

continues to drag on domestic demand.

With consumers wary and the Labour Day holiday boost

fleeting, the non-manufacturing PMI, which includes services and

construction, fell to 50.5 from 51.1 in May, the lowest since

December.

The services PMI sank to 50.2, a five-month low, and

construction PMI slipped to 52.3, the weakest reading since July

last year.

Analysts expect China to roll out more policy support

measures in the short term, while a government pledge to boost

fiscal stimulus is seen helping kick domestic consumption into a

higher gear.

"The weak PMI figures naturally call for more supportive

policies from the Chinese government. However, the room for

monetary policy easing is limited for the time being, as the

Chinese currency is under pressure," said Hao Zhou, chief

economist at Guotai Junan International.

"That said, fiscal policy is likely to take the driving

seat, suggesting that the central government will need to issue

more debt over the foreseeable future to boost the overall

domestic demand."

But high local-government debt and deflationary pressure

cast a long shadow over recovery prospects, despite a slew of

measures officials have rolled out since last October, tempering

investors' and factory owners' expectations.

China's central bank last month announced a relending

programme for affordable housing to accelerate sales of unsold

housing stock so supply better matches demand.

Officials are under pressure to fire up new growth engines

to reduce the economy's reliance on property.

Premier Li Qiang told a World Economic Forum meeting on

Tuesday that growth of new industries was supporting healthy

economic development.

"Since the beginning of this year, China's economy has

maintained an upward trend... and is expected to continue to

improve steadily over the second quarter," Li said.

Economists and investors are awaiting for the Third Plenum

to be held on July 15-18 with hundreds of China's top Communist

Party officials gathering in Beijing for the five-yearly

meeting.