China Caixin July Services PMI Falls as Output, New Work Drop

     BEIJING (MNI) - The expansion of the Chinese services sector eased in July,

as new orders and output softened, according to the latest survey of services

sector purchasing managers jointly released by Caixin magazine and Markit.

     The headline index fell to 51.5 in July, the lowest reading since May 2016,

from 51.6 in June. The reading was the same as April's 51.5. 

     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 fall in the Caixin index was in line with the increase shown in the

official services PMI jointly released July 31 by the China Federation of

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

CFLP index fell to 54.5 from 54.9 from in June, the 10th consecutive month that

the reading has been above the 54 mark.

     A smaller increase in production was the main cause of the slowdown in the

Caixin services PMI. The output index expanded at the slowest pace since May

2016, and was at the same level as April, according to Caixin. 

     A slower growth in new work also contributed to the fall. New order growth

fell to the weakest level in 16 months, Caixin said, adding that service

providers complained that fewer client numbers had weighed on subdued sales.

     The employment index also continued to soften. "The rate of job creation at

services companies held close to June's 10-month low and remained marginal,"

Caixin noted. "Services companies added to their payroll numbers for the 11th

month running."

     Input prices continued to rise, but at the slowest pace since last June,

according to Caixin. 

     As a result, output prices saw a further marginal increase.  

     The pressure on operating capacity across services companies tightened

further, but the pace was little changed from the previous two months.

     Chinese services firms expressed less confidence in their outlook for

business a year ahead, with the level of positive sentiment dipping to the

weakest since November, Caixin said.

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

separate manufacturing and services surveys, jumped to 51.9 from 51.1 in June,

the highest rate in four months.

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

The headline manufacturing PMI rose to 51.1 in July from 50.4 in June, the

strongest reading since 51.2 in March, according to data published by Caixin on

Tuesday.

     "China's economic performance in July was stronger than expected, mainly

due to sustained recovery in the manufacturing sector," said Zhong Zhengsheng,

director of macroeconomic analysis at CEBM Group, a subsidiary of Caixin.

"However, downward pressure on the economy likely remains as the index gauging

companies' confidence toward the 12-month business outlook dropped in both the

manufacturing and services industries."

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

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

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