HSBC China Composite PMI™ data (which covers both manufacturing and services) signalled that business activity in China fell for the second month running in March. Though slight, the rate of contraction was still the sharpest since November 2011, with the HSBC Composite Output Index posting at 49.3 in March, down from 49.8 in February.
Data for March signalled that the reduction in overall business activity was driven by the manufacturing sector, which posted its sharpest contraction of output since November 2011. Meanwhile, services activity growth strengthened to a four-month high, as signalled by the HSBC China Services Business Activity Index posting at 51.9 in March, up from 51.0 in February. However, growth remained subdued in the context of historical data.
New business followed a similar trend to output, with new work falling for the second successive month at manufacturers, but rising at service sector firms. The rate of new order growth in the service sector was little-changed from February and moderate, amid reports of new client wins. However, manufacturers’ new orders fell at the strongest rate in 28 months.
Chinese manufacturers cut their staffing levels again in March, albeit marginally. In contrast, higher volumes of new work led service providers to expand their payroll numbers at the fastest rate since June 2013. Notably, job creation at service providers offset job shedding at manufacturers, and led to the first increase of employment at the composite level for five months.
March data signalled that outstanding business fell for the second month in a row at manufacturers, albeit marginally. Backlogs of work also decreased slightly at service sector firms. While manufacturers reported that fewer new orders enabled them to lower the level of work-in-hand, service providers linked the reduction to higher staffing levels.
Input costs faced by Chinese manufacturers fell at the sharpest rate since August 2012 in March. According to panellists, suppliers cut their charges in response to
weaker demand for inputs. Meanwhile, cost burdens faced by service sector firms rose at the quickest pace in four months, amid reports of increased staffing costs. At the composite level, total input costs fell markedly over the month. Output charges fell sharply in China’s manufacturing sector, with a number of panellists citing lower input costs and competitive market pressures. In contrast, service providers increased their selling prices for the second month in a row, albeit marginally.
