China’s January Services PMI is out and is the first of the Chinese indicators to break out towards higher growth levels:
The HSBC China Composite PMI data (which covers both manufacturing and services) signalled a further expansion of business activity during January. Output at the composite level has now increased for five successive months, with January posting a solid rate of expansion, the fastest in two years. The HSBC China Composite Output Index posted 53.5 in January, up from 51.8 in December.
Output across both the manufacturing and service sectors increased simultaneously for the third month in a row in January. Manufacturers signalled a marked rate of expansion in the context of historical data, while growth in the service sector was solid, as signalled by the HSBC China Services Business
Activity Index recording 54.0 in January, up from 51.7.
New business also rose across both the manufacturing and service sectors in January. The growth rates of new orders were quicker than in December and solid across both sectors. Overall, this led to the strongest growth of composite new orders in two years.
Backlogs of work continued to fall in the service sector in January. That said, the rate of depletion eased from December and was only slight. Meanwhile, outstanding business increased in the manufacturing sector at a modest pace. Concurrently, work-in-hand increased at the composite level (slightly) for the first time in six months.
Staff numbers increased at a marked pace in the service sector during January, despite the rate of job creation having slowed from the previous month. Employment levels in the manufacturing sector also rose, albeit slightly. At the composite level, staffing levels increased modestly and at the fastest rate since May 2011.
This is not at all unexpected and is some offset to the weak official manufacturing PMI. Data should improve for the next few months before we find plateau.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
