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HSBC's China services PMI confirms rebound indicated by official figure

Reading for Hong Kong edges higher despite drop in new orders from mainland

PUBLISHED : Tuesday, 05 November, 2013, 11:43am
UPDATED : Tuesday, 05 November, 2013, 1:10pm

A private survey released on Tuesday confirmed official figures from the weekend that showed growth in China’s services industry edged up last month, offering further indications that the economy has stabilised in the run-up to a key party reform meeting.

The Markit/HSBC services purchasing managers index (PMI) rose to 52.6 from September’s 52.4, well above the 50 line that separates expansion from contraction.

The survey showed new business growth was at a seven-month high, and the business outlook for the next 12 months improved on the previous month, although it was still below trend. Employment levels also ticked up.

“Service sectors saw modest but broad-based improvement into 4Q,” said HSBC economist Qu Hongbin, in a note accompanying the data.

“This should help cement China’s growth momentum in the coming months.”

The overall message tallied with that in China’s official services PMI on Sunday, which showed a rise to 56.3, the fastest increase in 13 months.

But the two surveys differed in their reports for new orders, with the HSBC survey showing an increase to the highest level since March, while the official survey registered a decrease from the previous month.

The official reading is weighted towards bigger and state-owned firms and tends to come in higher than the HSBC survey, which focuses on smaller and private businesses.

Beijing hopes that the services industry, which has so far weathered the global growth slowdown much better than the factory sector, will become an increasingly important pillar in the economy, allowing China to move away from investment and exports as the main drivers of growth.

Ways to restructure the economy along those lines are expected to be the major focus of the third plenary meeting of top party officials this weekend.

The services sector accounted for about 45 per cent of the economy last year.

Despite rising to a seven-month high, Hong Kong’s overall business conditions remained mostly flat in the month ... with overall business from [mainland] China still remaining weak
HSBC economist Qu Hongbin

Meanwhile, the HSBC PMI for Hong Kong, also released on Tuesday, edged up to 50.1 last month from 50 in September and 49.7 in the two previous months.

The latest PMI figure shows a fractional improvement in operating conditions in the city’s private sector, although it rose to its highest level in seven months.

However, new business from mainland China continued to contract last month, and at a faster rate than in September.

Employment contracted for the eighth consecutive month, and at the fastest pace since July.

Overall input prices faced by private-sector companies in Hong Kong increased moderately, at a slower pace than in September. The latest rise in costs reflected higher salaries.

"Despite rising to a seven-month high, Hong Kong’s overall business conditions remained mostly flat in the month as the major sub-indices moderated from September, with overall business from China still remaining weak," Qu said.



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