HSBC China Composite PMI™ data (which covers both manufacturing and services) signalled a third successive monthly reduction of Chinese business activity during April. However, the rate of contraction was only slight and similar to that recorded in the previous two months, with the HSBC Composite Output Index posting at 49.5 in April (up slightly from 49.3 in March).
Latest data signalled that the manufacturing sector continued to drive the overall reduction of output, with production in the sector falling moderately during April. In
contrast, service sector firms saw a modest expansion of business activity. That said, the rate of growth eased from March and remained weak in the context of historical data, as signalled by the HSBC China Services Business Activity Index posting at 51.4 in April, down from 51.9 in March.
As was the case with output, new business declined again at Chinese manufacturers, but rose at service providers in April. However, the rate of new order growth at service providers was moderate and remained slower than the series average. Reports from panellists suggested that new products and larger client bases boosted new work, but fragile market conditions dampened the pace of expansion.
At the composite level, new business declined for the third month running, albeit marginally. April data continued to signal divergent trends with regards to employment, with Chinese manufacturers cutting their workforce numbers at a modest pace while service providers raised theirs. That said, the pace of payroll
expansion at service providers eased to a seven-month low, with a number of firms suggesting that cost reduction policies muted job creation. Consequently, employment at the composite level declined slightly in April, following a marginal increase in March.
Volumes of outstanding business fell across both the manufacturing and service sectors during April. However, the rates of backlog depletion remained marginal in both cases. Anecdotal evidence suggested that fewer new orders enabled manufacturers to reduce their work-in-hand, while muted client demand led to spare capacity at service providers.
Chinese manufacturers signalled a solid reduction in average cost burdens during April, amid reports of lower raw material prices. Meanwhile, service providers
registered a modest rate of inflation that was linked to higher staffing costs. That said, inflation was much weaker than the series average. At the composite level, average input costs fell moderately over the month.
Manufacturers in China cut their selling prices again in April and at a marked rate. Reports from panellists suggested that discounts were made to boost client demand. Service sector firms meanwhile cut their tariffs for the first time in three months, albeit marginally, with a number of respondents citing competitive market pressures.
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