The HSBC China Services Purchasing Manager’s Index (PMI) fell from 53.5 in May to 51.8 in June, according to a report from HSBC Holdings PLC released on Friday.
Annabel Fiddes, an economist at Markit, issued a statement saying that the latest PMI data clearly signaled an additional loss of growth momentum in the economy in China at the end of Q2. She also added that business activities, the services sector, employment as well as new orders all expanded at slower rates. Meanwhile, business outlook optimism was also moderated.
Fiddes also added that the continued underperformance of manufacturers as well as the slowdown in the services sector could cause the relevant authorities to introduce further stimulus measures in order to ensure that the momentum growth improves in the 2nd half of the year with the goal of reaching a growth GDP target of 7 percent.
HSBC and Markit said in a statement that China’s services sector activity growth had moved down to a five month low in June.
The HSBC China manufacturing sector PMI for June, which was released on 30 June, showed an increase to 49.4 from the 49.2 score in May. This however still indicates a continued contraction in manufacturing activity.
The Services PMI is an indicator of the economic health the sector enjoys and is calculated based on input from a number of different services companies. These would include firms involved in transport and communication, financial intermediaries, computing and IT, hotels and restaurants as well as business and personal services.
A PMI score of more than 50 indicates that there is expansion in the sector being reported on, while lower than fifty indicates a contraction.
The calculation of the China Services PMI is done by HSBC using data compiled from a monthly questionnaire that is distributed amongst more than 400 private service-sector companies.
Conversely, China’s official non-manufacturing PMI, a competing indicator to HSBC, reported an increase to 53.8 in June over the 53.2 score reported in May. These figures are according to information from the China Federation of Logistics and Purchasing.
MT4 Chart: HSBC