China Caixin Oct Services PMI Rises But Remains Weak

     BEIJING (MNI) - The expansion in the Chinese services sector accelerated

modestly in October but remained weak by historical standards, as input and

output prices grew at a moderate pace, according to the latest survey of

purchasing managers jointly released by Caixin magazine and Markit.

     The headline index rose to 51.2 in October, up from the 21-month low of

50.6 in September, but the reading was still the second lowest this year. 

     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 services index contrasted with the decline in the

official services PMI jointly released Oct. 31 by the China Federation of

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

CFLP services PMI was at 54.3, down from September's 55.4 reading. The CFLP

attributed the slowdown to the week-long National Day holiday, during which the

construction sector suspended many projects. 

     Growth in the Caixin services PMI was attributed mainly to rising input and

output prices. 

     Input prices strengthened to a four-month high, but the increase was

moderate, according to Caixin.

     Services providers raised the prices they charge "at a pace that, though

modest, was the quickest seen since August 2015," Caixin said. 

     New orders registered a modest increase similar to that recorded in

September.

     The services employment index saw a marginal expansion. "Firms hired

additional workers in line with business requirements," Caixin noted.

     Services companies showed a marginal drop in the level of work-in-hand (but

not yet completed) for the second month in a row.

     Chinese services firms' confidence in their business outlook a year ahead

improved slightly, Caixin said.

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

manufacturing and services surveys, fell from 51.4 in September to 51.0 in

October, the lowest in 16 months, indicating that economic growth momentum is

slowing. 

     "The softer increase in overall output was largely driven by a further

slowdown in manufacturing production growth. Output at Chinese goods producers

rose at only a marginal pace that was the weakest since June," Caixin explained.

     The composite sub-index for input prices increased at a faster pace as

manufacturers suffered the biggest cost burdens since early-2011. 

     "According to panelists, greater raw material prices and stock shortages

had led suppliers to hike prices in October," Caixin said.

     "The Caixin PMIs for October showed that the economy had a relatively weak

start to the fourth quarter," said Zhong Zhengsheng, director of macroeconomic

analysis at CEBM Group, a subsidiary of Caixin, "However, monetary policy is

unlikely to be loosened unless major downside risks emerge," he said.

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

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com

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

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