The S&P Global PMI composite index for China rose from 47.0 in November to 48.3 in December, indicating that China's economy contracted for the fourth consecutive month but at a less pronounced rate. The business activity index for China's services sector, also published today, rose from 46.7 in November to 48.0 in December, while the manufacturing PMI survey, released earlier in the week, showed ongoing contraction with a decline in its headline index from 49.4 to 49.2.

These results are broadly in line with official CFLP PMI survey data which also showed ongoing contraction in the manufacturing and the non-manufacturing sectors in December. Public health conditions continue too have a significant impact on economic activity and sentiment, with Covid-19 cases increasing sharply in recent weeks after authorities relaxed restrictions.

Respondents to the service sector survey reported smaller falls in output and new orders in December but a decline in new export orders for the second time in the last three months. Payrolls were reported to have been cut at a slower pace, while the survey's measure of business sentiment rose to its highest level since July 2021. Respondents also reported a smaller increase in both input costs and selling prices.

The S&P 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 S&P 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.