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Signs of a global slowdown continue. The HSBC China Services PMI shows China Composite Output and New Orders Both Fall for First Time in Seven Months.
HSBC China Composite PMI ™ data (which covers both manufacturing and services) signalled a contraction of private sector output in China, following a six-month sequence of growth. That said, the rate of reduction was fractional overall, as signalled by the HSBC Composite Output Index posting at 49.8 in February down from 50.8 in January.Comment on the Comment
Staffing levels declined at manufacturing companies again in February and at the quickest rate in nearly five years. In contrast, service sector firms expanded their payroll numbers for the sixth month running. However, service sector firms were more cautious toward s taking on more staff, as the rate of job creation eased to a five-month low. Consequently, employment levels fell modestly at the composite level.
Backlogs of work decreased across both the manufacturing and service sectors in February. Though only slight, it was the first reduction of work-in-hand at goods producers since July 2013. Meanwhile, outstanding business at service providers fell at a moderate pace that was the quickest in a year. As a result, unfinished business declined marginally at the composite level.
Commenting on the China Services and Composite PMI™ data, Hongbin Qu, Chief Economist, China & Co - Head of Asian Economic Research at HSBC said: “The HSBC China Services PMI suggests that service sector growth seems to be stabilising at a relatively low level. However, combined with the weaker manufacturing PMI, the overall strength of economic growth is moderating and this is starting to weigh on employment growth. Beijing policy makers can and should fine-tune policy to avoid growth deceleration in the first half of the year.”
The comment by Hongbin Qu is ridiculous for two reasons. First and foremost, the idea that central banks can fine-tune anything is ridiculous. History proves just that.
Second, even if central banks could assure short-term growth, it is always at an expense. Hongbin Qu ignores that expense.
If anything, China has overinvested in everything from vacant houses, to vacant malls, to vacant shopping centers, to unused trains and airports. To prevent further malinvestments, China actually needs to slow (and it will).
Mike "Mish" Shedlock