HSBC China Composite PMI™ data (which covers both manufacturing and services) signalled a contraction of private sector output in China, following a six-month sequence of growth. That said, the rate of reduction was fractional overall, as signalled by the HSBC Composite Output Index posting at 49.8 in February, down from 50.8 in January.
Latest data signalled divergent trends across China’s manufacturing and service sectors. Output declined at goods producers for the first time since July 2013, while service providers saw a further increase of business activity. The rate of activity growth edged up slightly from January’s 29-month low, but remained marginal overall. This was signalled by the HSBC China Services Business Activity Index posting at 51.0 in February, up from 50.7 in January.
As was the case with output, manufacturers saw a renewed reduction of new business during February, while service providers signalled a further expansion of new order books. That said, growth was moderate and remained weaker than the historical average. At the composite level, total new business decreased, albeit fractionally.
Staffing levels declined at manufacturing companies again in February and at the quickest rate in nearly five years. In contrast, service sector firms expanded their payroll numbers for the sixth month running. However, service sector firms were more cautious towards taking on more staff, as the rate of job creation eased to a five-month low. Consequently, employment levels fell modestly at the composite level.
Backlogs of work decreased across both the manufacturing and service sectors in February. Though only slight, it was the first reduction of work-in-hand at goods producers since July 2013. Meanwhile, outstanding business at service providers fell at a moderate pace that was the quickest in a year. As a result, unfinished business declined marginally at the composite level.
Average input costs in China’s manufacturing sector fell for the second successive month in February, amid reports of weaker demand for inputs. In contrast, cost burdens continued to increase at service providers. That said, the rate of input price inflation was the weakest since June 2013. At the composite level, total input costs fell slightly over the month.
Manufacturers cut their output charges at a marked pace in February, as part of efforts to stimulate client demand. Meanwhile service providers raised their selling prices, albeit fractionally, following a reduction in January. Although growth of output and new orders remained weaker than their historical averages, service sector firms were optimistic with regard to the 12-month business outlook in February. Confidence in the sector was linked to forecasts of improving market conditions and company expansion plans.
