China Caixin PMI Services dropped to 51.1 in October, down from 51.3 and missed expectation of 52.8. PMI Composite Index edged up from 51.9 to 52.0, best reading since April. Markit noted that solid rate of manufacturing output growth contrasts with only marginal rise in services activity. Composite employment falls fro the first time in three months. Outstanding business at was at the fastest expansion since March 2011.
Commenting on the China General Services PMI™ data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said:
“The Caixin China General Services Business Activity Index dipped to 51.1 in October from 51.3 in the previous month, marking the slowest expansion in eight months amid subdued market conditions.
1) Demand across the services sector grew at a reduced pace, with the gauge for new business falling to the lowest level since February. The measure for new export business picked up slightly.
2) While the job market expanded at a weaker clip, with the employment gauge falling from the previous month’s recent high, the measure for outstanding business rose further into expansionary territory. This implied a mismatch between labor supply and demand.
3) Both gauges for input costs and prices charged by service providers edged down, but they remained in positive territory, reflecting relatively high pressure on costs, including those of workers, raw materials and fuel.
4) The measure for business expectations dropped to the lowest point in 15 months, indicating depressed business confidence.
“The Caixin China Composite Output Index inched up to 52 in October from 51.9 in the month before, amid an improvement in manufacturing, but a softer service sector performance. The employment gauge dipped into contractionary territory, indicating renewed pressure on the labor market, which was likely due mainly to structural unemployment. The measure for backlogs of work climbed to the highest level since early 2011, highlighting bottlenecks in production capacity and inventories due to weak business confidence.
“China’s economy continued to recover in general in October, thanks chiefly to the performance of the manufacturing sector. Domestic and foreign demand both improved. However, business confidence remained weak, constraining the release of production capacity. Structural unemployment and rising raw material costs remained issues. The foundation for economic growth to stabilize still needs to be consolidated.”
Full release here.
Eurozone PMI Services finalized at 52.2, time needed for ECB policy changes to take effect
Eurozone PMI Services was finalized at 52.2 in October, up from September’s reading of 51.6. PMI Composite was finalized at 50.6, up from prior month’s 50.1. Looking at some member states, Germany PMI Composite improved to 48.9, hitting a 2-month high but stayed below 50. Ireland PMI Composite dropped to 89-month low of 50.6. Spain’s reading dropped to 71-month low of 51.2. Though, France and Italy improved to 52.6 and 50.6 respectively.
Chris Williamson, Chief Business Economist at IHS Markit said:
“The euro area remained close to stagnation in October, with falling order books suggesting that risks are currently tilted towards contraction in the fourth quarter. While the October PMI is consistent with quarterly GDP rising by 0.1%, the forward looking data points to a possible decline in economic output in the fourth quarter.
“Worryingly, what little growth was seen in October was supported by firms eating into previously placed work, meaning demand needs to revive to boost new business inflows and prevent more firms coming under further pressure to cut activity and jobs.
“As for the immediate outlook, much depends on geopolitical issues such as US tariff developments and Brexit, though we will also be watching Christine Lagarde’s first policy meeting on 12th December to assess the appetite for further stimulus from the ECB. Time is needed for recent policy changes to take effect, though if the data flow continues to disappoint more action is on the cards for early next year.”
Full release here.