China Caixin Services PMI falls to 4-month low, output growth eases

9th April 2018

China Caixin (compiled by Markit) services Purchasing Managers’ Index (PMI) declined in March, indicating that business activity expanded at the slowest pace for four months at the end of the first quarter. The dip in the headline index was driven by weaker increases in output across both the manufacturing and service sectors during March.

Furthermore, rates of growth slipped to four-month lows in both sectors. At 52.3 in March, the seasonally adjusted Caixin China General Services Business Activity Index fell further from January’s multi-year peak, having slipped from 54.2 in February. The latest reading pointed to a modest increase in services activity that was softer than the long-run trend. Growth in manufacturing output was also slightly weaker than that seen on average over the series’ 14-year history.

“Both new business and employment grew at a slower rate last month, pointing to cooling demand. However, the ability of service providers to make a profit improved as input costs increased at a weaker pace while output prices edged up. The sub-index gauging service companies’ expectations towards business activity over the next 12 months declined to the lowest reading since September, suggesting that weakening demand has affected firms’ confidence,” said Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group.

Employment trends deteriorated across both sectors during March. Services companies added to their payrolls at a marginal pace that was the weakest in the current 19-month sequence of expansion. At the same time, job shedding intensified at goods producers, with workforce numbers declining at the fastest rate since last August. As a result, composite employment fell for the first time since last October, albeit at a marginal pace.

While the level of positive sentiment strengthened to a one-year high at manufacturers, optimism across the service sector dipped to a six-month low in March. At the composite level, business confidence edged up fractionally to the highest for nine months.


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