CN: General Services PMI

Sun Oct 08 20:45:00 CDT 2017

Actual Previous
Composite - Level 51.4 52.4
Services - Level 50.6 52.7

The Caixin China General Services Business Activity Index dropped from 52.7 in August to 50.6 in September. This follows a fall in the manufacturing PMI headline index, published earlier in the month, from 51.6 to 51.5. These moves in the two surveys resulted in a decline in the composite index from 52.4 in August to a three-month low of 51.4 in September.

The decline in in the service sector headline index in August reflects weaker growth in new orders, with the manufacturing survey also showing a deterioration in its measure of new orders.This resulted in the composite measure falling to its lowest level since June. Both surveys also showed weaker business confidence about the twelve-month outlook. Service sector respondents reported only a marginal increase in employment in September, though the manufacturing survey's employment measure indicated some moderation in the pace of job shedding, resulting in little change in the composite measure for the second month in a row.

The services survey showed slightly stronger growth in input costs, while selling prices were reported to have increased slightly in September after falling in August for the first time in nearly eighteen months. Manufacturers reported a sharper increase in input costs and selling prices, with the latter at a none-month high. This resulted in the composite measures of input costs and selling prices rising to eight and nine month highs respectively.

Chinese PMI surveys have provided mixed signals in recent months. The Caixin service sector PMI headline index has been volatile lately, picking up sharply in May, then falling in June and July, picking up sharply again in August, and now dropping sharply in September. In contrast, the official CFLP non-manufacturing PMI survey showed a drop in its headline index in August and then a very sharp increase to a three-year high in in September. Meanwhile, the drop in the Caixin manufacturing PMI headline index in September also contrasts with a spike in the official CFLp manufacturing PMI's headline index to its highest level since 2012.

More clarity about the strength of economic conditions in September should be provided by the release of key activity data next month. Advance estimates for economic growth in the three months to September will also be published next week.

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.