January data signalled weaker expansions of business activity and new orders at the start of 2014, which both rose marginally over the month. Consequently, firms cut their average tariffs at the quickest rate since June 2012 in an attempt to boost sales. Slower intakes of new work also led to a further depletion of work-in-hand, while employment growth eased to a marginal pace. Despite weakening business conditions, service sector firms signalled a strong degree of positive sentiment regarding the 12-month business outlook.
After adjusting for seasonal factors, the HSBC China Services Business Activity Index posted 50.7 in January down from 50.9 in December. This signalled only a marginal increase in Chinese service sector business activity. Furthermore, it was the slowest expansion of activity since August 2011 and well below the historical average. According to a number of surveyed firms, business activity growth was dampened by weaker-than-expected growth of new business.
Latest data signalled a slower rise in total new work during January, with Chinese service providers reporting only a marginal pace of new order growth. Furthermore, it was the weakest increase in new business since last June. When an increased amount of new work was noted, it was generally attributed to the release of new products, while other panellists commented that relatively subdued client demand stemmed from weaker economic conditions.
January data also signalled a slower expansion of payroll numbers, th
e slowest in four months. A number of surveyed companies hired additional staff to accommodate increased business requirements, while the non-replacement of staff at other firms led to reduced payroll numbers.
New orders were positive but weak:
And prices paid are tumbling suggest lacklustre demand:
Credit tightening and an emptying infrastructure pipeline are taking their toll. Worse to come.
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.
January data signalled weaker expansions of business activity and new orders at the start of 2014, which both rose marginally over the month. Consequently, firms cut their average tariffs at the quickest rate since June 2012 in an attempt to boost sales. Slower intakes of new work also led to a further depletion of work-in-hand, while employment growth eased to a marginal pace. Despite weakening business conditions, service sector firms signalled a strong degree of positive sentiment regarding the 12-month business outlook.
