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Spanish Services PMI Reached its Highest Level Since Almost 2 Years

In line with better data published for the month of May, (unemployment claims, PMI manufacturing), Services PMI rose to 47.3 in May up from 44.4 in April. It has been the best level since 23 months. A reading below 50 indicates contraction which means thay Spanish economy is just getting less worse. Neverthless, the last data still support government’s forecast of an economic recovery by the end of the year.


More detail from Markit:


“The ongoing decline in the Spanish service sector showed signs of easing in May as activity, new business and employment all fell at slower rates. Meanwhile, input costs rose only marginally and companies continued to lower their output prices at a marked pace.”


Commenting on the Spanish Services PMI survey data, Andrew Harker, economist at Markit and author of the report said:


“Although signalling a continuation of the decline in the sector, the latest Services PMI data for Spain provide some cause for optimism. Activity moved closer to stabilisation than at any time since mid-2011. Following on from a similar trend in the manufacturing PMI data, maybe we are starting to see some light at the end of the tunnel. Developments in the wider euro area economy over the next few months will probably be key to whether this turns out to be a false dawn or the start of a sustained recovery.”

China PMI Composite Signaled Slowdown in May

This morning, HSBC & Markit published both Services and Composite PMI for May. A reading above 50 indicates expansion.


The services activity which accounted for 46% of China’s GDP in 2012 stabilized at relatively low level of growth in May. Indded, the PMI for the services industry inched up to 51.2, the second lowest reading since August 2011.


Taking into account the manufacturing activity, the Composite PMI suggested only a slight expansion in May as the index posted 50.9 down from 51.1 in April. It indicated the weakest expansion since last October.


From the HSBC & Markit:


“Business activity at service providers increased at a modest pace. The latter was signaled by the HSBC China Services Business Activity Index, which posted 51.2 in May. This was broadly unchanged from April’s 51.1 and was one of the lowest readings in the series history”…”HSBC China Composite HSBC China Composite PMI™ data (which covers both manufacturing and services) signalled only a slight expansion of output during May. The HSBC China Composite Output Index pos ted 50.9, and down from 51.1 in April, indicated the weakest expansion in business activity since last October.”


These two surveys add dome concerns over the loss of momentumm recorded since the beginning of the year. Remind that in Q1 2013, GDP slowed to 7.7% YoY down from 7.9% in Q4 2012. Note that fortunately, Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC saw some supportive factors in the coming months:


“The improving property market and Beijing’s renewed effort on expanding VAT tax reform nationwide could lend some support for the service sector’s future development.”

Finally, trade balance, industrial production, and retail sales for May will be published later this week.