HSBC China Composite PMI™ data (which covers both manufacturing and services) pointed to a further rise in total business activity in China during June. However, the rate of expansion eased to a marginal pace that was the slowest recorded since May 2014. This was signalled by the HSBC Composite Index posting only slightly above the neutral 50.0 mark at 50.6 in June, down from 51.2 in May.
The decline in the headline index was partly caused by a further fall in manufacturing output in June (albeit marginal), but also due to a moderation in the rate of service sector activity growth. Moreover, it was the slowest expansion in services business activity since January, as signalled by the HSBC China Services Business Activity Index posting 51.8, down from May’s eight-month high of 53.5.
The slowdown in services activity growth reflected softer new business gains in June, with service providers signalling the slowest increase in new orders in 11 months. According to panellists, relatively subdued market conditions had dampened overall client demand. Meanwhile, manufacturers saw only a marginal expansion of new work, following a three-month sequence of contraction. As a result, composite new business increased only modestly over the month.
Slower growth of activity and new orders led service sector companies to raise their staff numbers at a weaker rate in June. Furthermore, the pace of job creation was the slowest in three months and only marginal. In contrast, manufacturers cut their payrolls for the twentieth successive month in June, with the latest reduction the sharpest since February 2009. The particularly marked reduction in manufacturing staff numbers therefore led employment to fall modestly at the composite level in June.
Outstanding business at services companies declined modestly in June, which was generally linked by panellists to higher workforce numbers and slower growth of new work. Meanwhile, manufacturers saw backlogs of work increase slightly over the month. At the composite level, unfinished workloads fell fractionally in June.
Chinese service providers saw a further increase in total cost burdens during June. That said, the rate of input price inflation was only slight and much weaker than the series average. Cost burdens faced by manufacturers meanwhile continued to decline, though the latest reduction in input costs was the slowest since last August. Overall, average input prices fell slightly at the composite level.
Prices charged fell across both the manufacturing and service sectors in June. While manufacturers reduced their selling prices modestly, service providers cut their charges only slightly.
Services companies operating in China continued to signal optimism towards the 12-month business outlook in June. That said, the overall degree of positive sentiment edged down to its lowest since July 2014.