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China Services PMI at Lowest Levels Since 2005!

  • Written by Syndicated Publisher No Comments Comments
    August 8, 2014

    An interesting divergence is underway in China with manufacturing in expansion while the service sector is at the lowest reading since November 2005 according to HSBC China Composite PMI 

     HSBC China Composite PMI™ data (which covers both manufacturing and services) signalled a third consecutive monthly expansion of Chinese business activity in July. That said, the rate of increase eased from June‟s 15-month high and was moderate overall. This was signalled by the HSBC Composite Output Index posting at 51.6 in July, down from 52.4 in the previous month. The latest expansion of composite output was led by manufacturers, as business activity at service providers was unchanged from the previous month. Furthermore, it was the strongest expansion of manufacturing output in 16 months. This contrasted with a stagnation of services activity, which was signalled by the HSBC China Services Business Activity Index posting at the no-change mark of 50.0 in July. This was down from 53.1 in June and the lowest index reading in the near nine-year series history.

    Comment Commenting on the China Services and Composite PMI™ data, Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC said: “The headline HSBC China Services PMI came in at 50.0 in July, the lowest reading since the series began in November 2005. Both the new business and outstanding business indices declined from their levels in June. The weakness in the headline number likely reflects the impact of the ongoing property slowdown in many cities as property related activity, such as agencies and residential services, see less business. Meanwhile, the employment and business sentiment indices remain stable. In the coming months, we think the service sector may get some support from the recovery in investment. But today’s data points to the need of continued policy support to offset the drag from the property correction and consolidate the economic recovery.

    Clamoring for “Policy Support”

    It’s amusing  to hear the continuous parade of chants for “policy support” that have fueled asset bubbles worldwide.

    In China, the primary asset bubble is real estate, in the US, the primary asset bubbles are equities and junk bonds.

    When the bubbles burst, people will want central banks to “do something”.

    Unfortunately, they already did, multiple times, which is precisely why the world has witnessed serial asset boom-bust bubbles of increasing amplitude in the last decade

    Read more at http://globaleconomicanalysis.blogspot.com/2014/08/china-services-pmi-lowest-reading-since.html#asrjYILqvM4p2BZl.99

    Images: Flickr (licence attribution)

    About The Author

    Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.  Visit Sitka Pacific’s Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

    You are currently viewing my global economics blog which typically has commentary every day of the week. I am also a contributing “professor” on Minyanville, a community site focused on economic and financial education.  Every Thursday I do a podcast on HoweStreet and on an ad hoc basis contribute to many other sites.

    When not writing about stocks or the economy I spend a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com.

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