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China Services PMI Falls To 50.7 In May - HSBC

chinatrade 041111

Activity in China's services sectors continued to expand in May but at a slower pace, the latest survey from HSBC and Markit Economics revealed on Thursday.

The services PMI saw a score of 50.7 last month, the bank said - down from 51.4 in April.

The composite PMI climbed into expansion at 50.2 in May - up from the revised 49.5 in April (originally 49.4) and snapping a three-month string of decline.

A reading above 50 signals expansion in a sector, while a score below means contraction.

"Coming after the stronger Manufacturing PMI reading for May, the slight disappointment in the headline Services PMI suggests that growth momentum remains slow and private sector sentiment is weak. We think policy makers should continue to ease monetary and fiscal policies in the coming months to help support growth," said Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC.

According to latest data, a slower decline in manufacturing output and a further rise in services activity supported the first expansion of combined output since January.

New business stabilized at manufacturers in May, following a three-month sequence of reduction. Meanwhile, total new orders placed at service providers continued to increase in May. That said, the rate of expansion was moderate and the slowest in four months.

Moreover, growth of new work in the service sector remained well below the historical series average. At the composite level, new business rose for the first time since January, albeit only slightly.

Latest data signaled a solid reduction of employment in China's manufacturing sector during May, while service providers raised their staff numbers for the ninth successive month. That said, the rate of job creation was unchanged from the previous month and only fractional.

Outstanding business declined across both the manufacturing and service sectors during May. Average input costs fell for the fifth month running at manufacturers, albeit at a modest pace.

Chinese manufacturers raised their selling prices for the first time in six months in May, albeit marginally. Average output charges set by service sector firms, however, declined slightly for the second successive month.

"Latest data signaled a relatively big drop in the business expectations index, which fell to an 11-month low of 58.1, down from 60.7 in April. Both the new business and outstanding business indices were slightly weaker than April. The employment index, unchanged over the month, remained at a relatively low level," Hongbin said.

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