Honestly, if it were not for the aggressive credit numbers in January, I’d be ready to call the Chinese growth recovery dead on arrival. The latest survey to confirm that the bounce is fading is the HSBC services PMI (which is different to the official non-manufacturing PMI that includes construction and other stuff). The Services PMI fell 1.9 points to 52.1. That’s all four four major PMIs slowing significantly in February and these surveys rarely agree so fully:
Business activity in the Chinese service sector expanded at a modest pace in February. New business also rose modestly, but growth slowed from January’s eight-month high. Backlogs of work continued to fall, while payroll numbers increased further. On the price front, input costs rose solidly and at the quickest rate in five months, while output charges were broadly unchanged. Chinese service providers meanwhile expressed optimism regarding the 12-month business outlook in February.
After adjusting for seasonal factors, particularly associated with the Spring Festival, the headline Business Activity Index posted 52.1 in February, signalling a modest rate of expansion in service sector activity. The rate of growth slowed from the previous month, with the index posting below January’s reading of 54.0. Moreover, the index posted more than four points below the series average. The overall rise in business activity was generally associated with new projects.
New business also increased in February. However, the rate of growth eased from January and was modest. Exactly 13% of respondents recorded an increase, and was linked to stronger client demand.
It is possible that the Chinese NY adjustments in the four surveys have just not coped. It is also possible that the big credit number for January, which is the last forward indicator offering hope of acceleration from here, was juiced by the same factor.
The February credit number will be very interesting.
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.
