China HSBC May services PMI grows modestly after soft patch

Mainland industry PMI up just 0.1 percentage point in May as HK private sector index slips

PUBLISHED : Wednesday, 05 June, 2013, 11:57am
UPDATED : Thursday, 06 June, 2013, 2:23am

Activity in the mainland's service sector expanded modestly last month, but the pace of growth was little changed from April, a private survey showed yesterday, adding to worries about slowing momentum.

Meanwhile, a parallel survey for Hong Kong's private sector showed business activity in the city contracted last month as new orders fell.

On the mainland, the HSBC/Markit purchasing managers' index for the services industry edged up to 51.2 last month after seasonal adjustment, the second-lowest reading since August 2011 after 51.1 in April.

The services sector accounted for 46 per cent of the mainland gross domestic product last year, and the weak growth seen in the survey adds to concerns raised by earlier PMI surveys over the loss of growth momentum.

One in eight respondents reported higher volumes of new orders, but more than four in five saw no improvement from April.

HSBC's chief China economist, Qu Hongbin, said: "A soft patch in manufacturing growth continues to weigh on this industry and adds more downside risks to China's growth rate in [the second quarter]."

The mainland's official services PMI slipped to 54.3 last month from 54.5 in April. The official manufacturing PMI ticked up to 50.8 from April's 50.6, but the HSBC/Markit manufacturing PMI dropped to 49.2, the lowest level since October, from 50.4 in April.

A reading above 50 indicates expansion of business and one below 50 implies contraction.

In Hong Kong, the HSBC PMI slipped to 49.8, the lowest in eight months, from 49.9 in April.

The volume of new orders received by private-sector companies shrank for the second consecutive month, and the rate of contraction was the strongest since September.

New orders from the mainland have now fallen for four consecutive months, with the latest decline the sharpest since March 2009, the survey showed.

Output shrank for the first time since September, although the rate of contraction was marginal. Private-sector employment in the city contracted for the third consecutive month, but input costs rose at the strongest pace in four months.

Donna Kwok, a greater China economist for HSBC, said: "Businesses in Hong Kong are stalling a little. But given how fast mainland client demand has deteriorated, activity is holding up relatively well.

"Wages are still rising at an above-trend rate, helping to underpin domestic spending. GDP looks well placed to expand again in [the second quarter]."