HSBC China Composite PMI™ data (which covers both manufacturing and services) signalled a further rise in total business activity in China at the start of 2015. That said, the rate of growth eased to the weakest in eight months, with the HSBC Composite Output Index posting at 51.0 in January, down from 51.4 in December.
The slower expansion of output was largely driven by weaker growth of services activity, which hit a six-month low in January. This was signalled by the HSBC China Services Business Activity Index posting 51.8 at the start of the year, down from 53.4 in December. Anecdotal evidence suggested that activity levels rose in line with new business growth. Meanwhile, manufacturers reported the first expansion of output since last October, albeit only fractional.
In line with the trend for activity, new order growth at service providers also slowed at the start of 2015, having eased further from November’s two-and-a-half year peak. Reports from panellists mentioned that improving market conditions and a subsequent upturn in client demand helped to secure new work in January. New workloads meanwhile stabilised at manufacturing companies, following a fractional reduction in December. At the composite level, new business increased at a moderate pace that was the slowest since last May.
Despite weaker growth of activity and new work, service providers continued to add to their staff numbers in January, amid reports of ongoing planned company expansions. Furthermore, the rate of job creation accelerated to the strongest in over a year-and-a-half. In contrast, manufacturing employment declined, albeit at the slowest rate in 15 months. As a result, workforce numbers increased marginally at the composite level.
Outstanding business increased across both the manufacturing and service sectors in January. It was the first time that unfinished workloads had increased at
service providers since June 2014, though the rate of accumulation was only slight. Backlogs of work meanwhile rose modestly at manufacturing companies. Overall, the level of work-in-hand increased at a modest pace that was the strongest in 15 months.
The recent fall in global oil prices helped to weaken input price inflation to a 63-month low at service providers, while manufacturers saw the steepest reduction in input costs since March 2009.
Prices charged by manufacturers and service sector companies declined in January. That said, the rate of discounting in the service sector was only fractional, but
manufacturers cut their selling prices sharply. Service sector companies remained optimistic towards future business activity growth in January. Furthermore, the overall degree of positive sentiment was the strongest since March 2014.