CN: General Services PMI

Tue Jul 04 20:45:00 CDT 2017

Actual Previous
Composite - Level 51.1 51.5
Services - Level 51.6 52.8

The Caixin China General Services Business Activity Index declined from 52.8 in May to 51.6 in June. The manufacturing PMI headline index, published earlier in the week, rose from 49.6 to 50.4. These offsetting moves in the two surveys resulted in a drop in the composite index from 51.5 in May to 51.1 in June.

Service sector respondents reported weaker growth in business activity grew in June, with new orders also slowing after reaching year-to-date highs in May. The manufacturing survey also showed only modest growth in both output and new orders in June, with the composite measure of new orders falling to a nine-month low. Service sector respondents were slightly more confident about the twelve-month outlook for activity in June, but the manufacturing survey showed weaker sentiment. Both surveys' measures of employment weakened in June, with the composite measure of employment dropping for a third consecutive month.

The services survey showed a moderation in price pressures in June, with input costs reported to have risen at the slowest pace since October and selling prices raised the least in four months. The manufacturing survey showed a modest increase in input costs and selling prices, with composite input costs and selling prices up only marginally in June.

The PMI surveys together suggest overall business conditions were subdued in June, with the manufacturing survey showing output expanded only slightly and the services survey showing weaker activity in the sector. The average for the composite index in the three months to June is well below the average for the three months to March, suggesting that preliminary estimates for gross domestic product in the quarter just ended - scheduled for release later in the month may show some moderation in economic growth. Speaking last week, Chinese Premier Li Keqiang expressed confidence that the government's growth target for 2017 of 6.5 percent would be met.

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.