China Caixin PMI services rose to 53.1 in September, up from 51.5 and beat expectation of 51.5. Caixin PMI composite rose 0.1 to 52.1, showing that overall business activity expanded modestly at the end of Q3. Still, the rate of activity growth remains lackluster compares to earlier in 2018.
Commenting on the China General Services PMI™ data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said:
“The Caixin China General Services Business Activity Index rebounded to 53.1 in September from 51.5 in August. New business increased at a faster rate last month than in August, pointing to some improvement in demand. However, employment in the service industry contracted abruptly and that sub-index fell to its lowest level since March 2016. Prices charged by service providers declined for the first time in 13 months, while input costs rose at their quickest pace since January, which could squeeze company profit margins. Reflecting that, the sub-index of business expectations, which gauges service companies’ confidence toward the prospects of their operations over the next 12 months, edged down in September from the previous month.
“The Caixin China Composite Output Index inched up to 52.1 last month from 52.0 in August, indicating the performance of the Chinese economy was stable for the month. However, demand remained subdued as the growth rate for new orders, although marginally higher than the previous month, lingered at a low level. The increase in output prices slowed while the gain in input prices accelerated slightly. That meant companies were still under relatively large cost pressures, which contributed to a fall in the sub-index of future output.
“What we should be wary of is that overall employment contracted in September, with the sub-index hitting its lowest level since August 2016. The deterioration in employment will test policymakers’ determination in pressing ahead with reforms.”
