Services PMI Beats, Business Expectations At Decade High

China's services PMI comfortably beat expectations, rising to 54.4 (versus 52.0 expected and 41.6 prior). This is the highest print since June 2022. The profile for this PMI matches what we saw in 2022 in terms of a sharp rebound post the end of the Shanghai lockdown, the market will be hoping for a more sustained recovery through 2023.

• The detail showed fairly uniform improvement across the sub-indices. Employment and new export orders remain in contraction territory though (46.7 & 45.9 respectively). The headline new orders index surged to 52.5 from 39.1, while the business activities expectation index rose to 64.9, which is fresh highs back to 2012, see the chart below.
• The manufacturing PMI met expectations, rising to 50.1, the prior month was 47.0. New orders were back to 50.9, highs back to the mid 2021. New export orders and the employment sub-indices remained comfortably below the 50.0 expansion/contraction point.
• Elsewhere, Dec industrial profits slipped to -4.0% YTD y/y, versus -3.6%.
• The IMF also upgraded the 2023 GDP outlook for China to 5.2% (from 4.4%). Note the consensus sits at 5.1%.

Fig 1: China Non-Manufacturing PMI Business Expectations Index

Source: MNI - Market News/Bloomberg