China Caixin PMI Services dropped to 51.8 in July, down from 52.0 and missed expectation of 52.0. PMI Composite rose slightly from 50.6 to 50.9. Markit noted that manufacturing sector stabilized but service sector growth weakened further. Total new work expanded at a slightly faster pace. Also, optimism regarding future output improved to three- month high.
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 51.6 in July, falling from 52.0 in the previous month.
- Demand for services remained solid. The gauge for new business edged down, although it remained in expansionary territory. The gauge for new export business rebounded back into positive territory, signaling a recovery in overseas demand.
- The employment gauge stayed in expansionary territory and edged up, indicating the services sector’s strengthening capacity to absorb workers.
- Both gauges for prices charged by service providers and input costs climbed further into positive territory. Prices remained stable.
- The measure for business activity expectations stayed the same as the previous month, suggesting service providers’ confidence regarding the outlook for their businesses was stabilizing.
“The Caixin China Composite Output Index inched up to 50.9 in July from 50.6 in the month before, chiefly thanks to an improvement in the manufacturing sector.
- The gauge for new orders increased and the one for new export business returned to expansionary territory, suggesting firmer demand for products and services.
- The measure for employment edged up, although it remained in contractionary territory. This indicates that lingering downward pressure on the job market didn’t escalate.
- The gauge for input costs edged down, but remained in positive territory, while that for output charges dipped into negative territory, pointing to downward pressure on the profitability of downstream companies.
- The measure for future output expectations climbed further into positive territory, suggesting a recovery in business confidence.
“In general, China’s economy showed signs of recovery in July, thanks to large-scale tax and fee cuts, as well as ongoing support from monetary policy and government-driven infrastructure investment. It remains to be seen if the economic recovery can continue amid trade fictions with the U.S. and rigid regulations on the financial sector and debt levels. The recovery in July suggests that China’s economic slowdown is under control.”
