China Caixin Aug Services PMI Jumps as Output, New Orders Rise

     BEIJING (MNI) - Expansion of the Chinese services sector accelerated in

August as new orders and output increased, according to the latest survey of

purchasing managers jointly released by Caixin magazine and Markit.

     The headline index rose to 52.7 in August, up from 51.5 in July and the

strongest reading since 52.8 in May. 

     Readings above 50 indicate expansion in the services sector, and readings

below 50 indicate contraction. The higher the PMI reading above 50, the faster

the expansion in the sector. 

     The rise in the Caixin index contrasted with the drop shown in the official

services PMI jointly released Aug. 31 by the China Federation of Logistics and

Purchasing (CFLP) and the National Bureau of Statistics (NBS). The official PMI

for August fell to 53.4 from 54.5 in July, ending 10 consecutive months of

readings above the 54 mark. Still, the reading was relatively strong. 

     For the Caixin services PMI, an increase in production and new orders were

the main sources of the growth, and the output index expanded from the middle of

the third quarter. 

     "The latest increase in new work was the fastest seen in three months and

solid overall, with a number of companies linking growth to improving market

conditions and new marketing strategies," Caixin said. 

     The employment index notably rose at the fastest pace for four months,

Caixin said. Services companies added to their payroll numbers for the 12th

month running.

     Input prices continued to rise, but at one of the slowest paces seen in the

past eight years, according to Caixin. 

     The pressure on operating capacity across services companies tightened

further due to more new orders, but the companies saw only a marginal rate of

backlog accumulation, which was the weakest in four months, Caixin noted. 

     However, prices charged by services companies declined because of fierce

market competition. Though the drop was slight, it was the first time that

prices had fallen for nearly a year and a half.

     Chinese services firms expressed stronger confidence in their outlook for

business a year ahead, and the level of positive sentiment rose markedly, Caixin

said.

     Caixin's China Composite PMI, which combines the results of the

manufacturing and services surveys, rose to 52.4 from 51.9 in July, the highest

rate in six months.

     The rise was led by a strong performance of the manufacturing sector. The

headline manufacturing PMI rose to 51.6 in August from 51.1 in July. It was the

strongest since 51.7 in February, according to data published by Caixin last

Friday.

     Input prices rose sharply at manufacturers. 

     "Notably, the rate of input price inflation at goods producers accelerated

to a five-month high, with a number of panelists commenting on higher raw

material costs," Caixin said. "Subdued cost pressures at services companies did

not offset the steeper increase in input costs at manufacturers, however, as

shown by composite input costs rising to the greatest extent since March."

     "The index of new business signaled a solid increase in workloads," said

Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group, a subsidiary

of Caixin. "The recovery in both manufacturing and services has led the economic

outlook to continue to improve. But we need to closely watch whether the recent

rises in input costs will weigh on corporate profits and fuel inflation."

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532-5998; email: rich.dirks@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com

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