China’s Service Activity Expanded In January: HSBC PMI

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By Bhaskar Prasad | February 5, 2013 3:29 PM EST

China's service activity expanded in January at a faster pace than in the previous month, according to the HSBC Services Purchasing Managers’ Index released Tuesday.

The Services PMI, a measure of nationwide service activity, was 54 in January, up from 51.7 in December and still in positive territory.

“Services activities resumed faster expansion on rising new business flows, along with the recovery of manufacturing growth. Still solid job gains plus higher business expectations bode well for further improvement of services sectors’ growth. Following the growth bottoming out in 4Q 2012, China’s growth recovery is now on a firmer footing,” Hongbin Qu, chief China economist and co-head of Asian economic research at HSBC, said in a note.

Significantly, the index remained in the expansion zone, a reading above 50. The expansion of the service activity should allay the fears about a sharp retardation of the Chinese economy.

“Backlogs of work continued to fall in the service sector in January. That said, the rate of depletion eased from December and was only slight. Meanwhile, outstanding business increased in the manufacturing sector at a modest pace,” Markit said in a note.

The HSBC China Composite Output Index rose to 53.5 in January, from 51.8 in December. “New business also rose across both the manufacturing and service sectors in January. The growth rates of new orders were quicker than in December and solid across both sectors. Overall, this led to the strongest growth of composite new orders in two years,” Markit added.

It was reported last week that China's manufacturing activity expanded to a two-year high in January, according to the HSBC Manufacturing PMI. The final reading of the PMI, a measure of the nationwide manufacturing activity, rose to 52.30 in January compared to 51.5 in December.

However, the data released last week by the China Federation of Logistics and Purchasing showed that the PMI dropped to 50.4 in January from 50.6 in December.

Last month, it was reported that China’s economy rose at a better-than-expected rate in the fourth quarter of 2012, indicating a revival of the economic growth momentum of the country. According to the data released last month by the National Bureau of Statistics of China, the country’s gross domestic product, which measures the annualized change in the inflation-adjusted value of all goods and services produced, rose to 7.9 percent in the fourth quarter of 2012, from 7.4 percent in the third quarter.

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