China PMI Data Show Divergence Between Falling Manufacturing And Flat Nonmanufacturing Sectors

The HSBC China Services Purchasing Managers’ Index indicates the country’s nonmanufacturing sector continues to expand slowly and the HSBC China Composite PMI suggests the nation’s manufacturing sector continues to contract, according to Markit, which released the latest readings Monday at 9:45 a.m. Beijing time (Sunday at 9:45 p.m. EDT).

The nonmanufacturing metric was flat at 51.3 in each of the past two months, while the composite metric fell from 49.8 in June to 49.5 in July. “Although the [composite index] signaled only a marginal rate of reduction … it was the fastest recorded since November 2011,” Markit reported.

“China’s service sector has stabilized at a relatively low level of growth,” Hongbin Qu, chief economist for China and co-head of Asian Economic Research at HSBC, said in a statement about the latest China PMI readings. “But the profit margin continued to be squeezed given the divergence between input prices and prices charged indices. Without a sustained improvement of demand, services growth is likely to remain lackluster, putting downside pressures to employment growth.”