CN: General Services PMI

Wed Nov 02 20:45:00 CDT 2016

Actual Previous
Composite - Level 52.9 51.4
Services - Level 52.4 52.0

The Caixin China General Services Business Activity Index rose from 52.0 in September to 52.4 in October, a four-month high. The Caixin China Composite PMI, which covers both the manufacturing and services sectors, rose from 51.4 in September to 52.9 in October, with a solid improvement in manufacturing conditions accompanying the increase in the services sector index. The manufacturing PMI, published at the start of the month, rose from 50.1 in September to 51.2 in October, its highest level since July 2014.

Respondents to the services sector survey reported slightly better albeit still moderate - new orders compared with last month, with manufacturing survey respondents reporting the strongest growth in new business for just over two years. Combining the two sectors, new orders growth was at its strongest since November 2014.

The surveys also point to improved labour market conditions. Service sector respondents reported a second consecutive increase in payrolls in October, with the pace of job gains at its highest since January. Manufacturers reported more job losses, but at the slowest pace since May 2015, with combined job losses also slowing.

Both surveys showed stronger increases in input costs, particularly for manufacturers' raw materials, with the composite number increasing to a five-year high. Prices charged by manufacturers also increased sharply last month, though prices charged by service sector respondents were flat, with the composite number also increasing to a five-year high.

Overall, the Chinese PMI surveys indicate a substantial pick-up in activity in October, with the composite output index, covering both manufacturing and services, increasing to its highest level in more than three years. The surveys also show stronger price pressures. Officials will likely gain some confidence from these surveys that previous policy measures are having a positive impact, but additional stimulus remains possible if this apparent improvement is not matched by official data in coming weeks.

The Caixin China Services PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 400 private service sector companies. The panel has been carefully selected to accurately replicate the true structure of the services economy.

The Caixin China Composite PMI is a weighted average of the Manufacturing Output Index and the Services Business Activity Index, and is based on original survey data collected from a representative panel of over 800 companies based in the Chinese manufacturing and service sectors.

The PMIs have developed an outstanding reputation for providing the most up-to-date possible indication of what is really happening in the private sector economy by tracking variables such as sales, employment, inventories and prices. The indexes are widely used by businesses, governments and economic analysts in financial institutions to help better understand business conditions and guide corporate and investment strategy. In particular, central banks in many countries use the data to help make interest rate decisions. PMI surveys are the first indicators of economic conditions published each month and are therefore available well ahead of comparable data produced by government bodies.