HSBC China Composite PMI™ data (which covers both manufacturing and services) signalled a second successive monthly increase of Chinese business activity in June. Moreover, the rate of expansion accelerated to the strongest in 15 months, as signalled by the HSBC Composite Output Index posting at 52.4 in June, up from 50.2 in May.
June data indicated that a solid rise in activity at service providers and renewed output growth at manufacturers supported the faster expansion of output at the composite level. Furthermore, manufacturing output increased at the strongest pace since last November, while services activity growth was the quickest since March 2013. The latter was signalled by the HSBC China Services Business Activity Index posting at 53.1 in June (up from 50.7 in May).
Reports from panellists suggested that activity rose in line with stronger inflows of new business.
Total new work expanded at an accelerated and robust pace at service providers in June, while manufacturers saw the first increase in new business for five months. Furthermore, the expansion of new orders at service providers was the strongest since January 2013. As a result, new work rose solidly at the composite level.
Service sector firms increased their payroll numbers for the tenth successive month in June, and at the second-fastest rate in 2014 so far. Reports from panellists suggested that firms hired additional staff to help meet rising new workloads. Meanwhile, staff numbers fell again at manufacturing companies, albeit at the slowest rate in three months. Consequently, employment at the composite level was little-changed from the previous month in June.
Backlogs of work at Chinese service providers rose for the first time since January 2012 in June. Outstanding business also increased at manufacturers and for the first time since January. That said, the rates of accumulation were marginal in both cases. Anecdotal evidence mentioned that unfinished work rose due to increased volumes of new business.
Input costs increased for the first time in six months at manufacturers, but at a modest rate. Cost burdens faced by service providers also increased in June, and at a moderate pace that was the fastest in three months. However, the rates of input price inflation remained weaker than the historical averages for both sectors.
Following a slight increase in May, output charges set by manufacturers were broadly unchanged in June.
Meanwhile, service providers cut their selling prices for the third month running, amid reports of competitive market pressures. That said, the rate of discounting was similar to that recorded in the previous two months and only marginal. Service sector firms were generally optimistic towards the 12-month business outlook in June. That said, the degree of positive sentiment remained historically weak, despite improving upon May’s 11-month low.