Thu, Jan 21, 2021 @ 16:52 GMT
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China Caixin PMI dropped to 50.9, hard to turn around without strong stimulus

China Caixin PMI services dropped to 53.6 in January, down from 53.9 but beat expectation of 53.3. PMI composite dropped to 50.9, down from 52.2. Caixin noted that “services activity continues to rise solidly, but manufacturing sector remains subdued”, “new orders rise only slightly, despite rebound in export sales”, “overall employment stabilises”.

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 came in at 53.6 in January, down slightly from the previous month. Demand for services remained solid as the increase in new business accelerated marginally. The sub-index of employment rose, pointing to a faster expansion of payroll number at service providers. The fall in the input prices sub-index was quicker than the decline seen for the prices charged sub-index, which helped ease the pressure on companies’ profit margins. However, the sub-index of business expectations declined from the previous month, indicating services providers’ weakening confidence in the outlook of their operation for the coming 12 months.

“The Caixin China Composite Output Index fell from the previous month to 50.9 in January. The increase in new orders softened while new export business rose for the first time after dropping for nine consecutive months. That suggested the downward pressure on domestic demand was growing while external demand was holding up. The sub-index of employment rebounded to the break-even point of 50 after staying in contraction territory for seven straight months, underlining that government efforts to stabilize employment have taken effect. The sub-indices of input prices and output prices both went down, while the sub-index of future output, which reflects business confidence, edged up for the second month in a row.

“Overall, China’s economic growth was weighed on by weakening domestic demand in January, although exports improved marginally as the Sino-U.S. trade negotiations flagged signs of progress. The effects of China’s policies to support domestic demand and the development of the trade war between the country and the U.S. will remain key to the prospects of the Chinese economy. Given that the government has refrained from taking policies of strong stimulus, the downward trend of the economy may be hard to turn around for the time being.”

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