The Trend Of Service Industry And Comprehensive PMI Declined

With the rebound of health events in many places and the tightening of relevant epidemic prevention measures, China's service industry experienced a contraction trend after three months of expansion in September.

The Caixin China general service industry operating activity index (PMI) in September, released on October 8, recorded 49.3, down 5.7 percentage points from August, and fell below the boom and bust line for the first time since June.

China's manufacturing PMI of Caixin fell 1.4 percentage points to 48.1 in September, which was the same as that in May and the lowest in nearly five months. The decline of PMI in the two major industries dragged down Caixin's comprehensive PMI by 4.5 percentage points to 48.5, which was the first time since June to fall into the contraction range.

Caixin's PMI trend of China's manufacturing industry is different from that of the National Bureau of statistics, while the trend of service industry and comprehensive PMI is consistent with that of the National Bureau of statistics. Previously, the PMI of manufacturing industry increased by 0.7 percentage points to 50.1, while that of service industry decreased by 3.0 percentage points to 48.9; The composite PMI slowed 0.8 percentage points to 50.9, still in the expansion range.

From the sub data point of view, the service industry business activity index and new order index fell to varying degrees in September, falling to the contraction range for the first time since June, indicating the weakness of both supply and demand. The enterprises interviewed generally said that due to the prevention and control measures such as health incidents and silent control, the operation of the service industry was limited and the demand was weakened.

On the contrary, the index of new export orders in the service sector returned to the expansion range, although the expansion was limited, but ended the contraction trend of the previous eight months. Enterprises reflected that stronger external demand supported the recent rebound in business volume, but there were also signs that health events continued to restrict export sales.

The service industry's supply and demand also declined at the same time, which slowed down the employment contraction. In September, the service industry employment index continued to stay in the contraction range, falling to the lowest level since June. Some enterprises reduce employment because of cost reduction or business demand decline, and some enterprises do not replenish their staff after leaving. Health events restricted the operation of the service industry, resulting in the overstocked business volume index of the service industry higher than the critical point for the second consecutive month.

Due to the increase of raw materials and labor costs, the service industry input price index was still above the boom and bust line in September, but fell back to the lowest level in nearly three months. The pressure of rising costs is transmitted to the sales side, and the ex factory price index of the service industry accelerates to the highest level in seven months in the expansion range.

In September, the business expectation index fell to a six-month low, but still higher than the critical point. It is expected that the health events will be completely controlled, the market conditions will return to normal, and sales will recover, which supports the confidence of the industry. However, enterprises are worried about the end of health events, worrying liquidity and signs of weakening global economic growth.

Wang Zhe, senior economist of Caixin, said that the current situation of health events is still grim and complex, and the negative impact of health event control measures on the economy is still relatively significant. Since September, the number of confirmed cases in some key areas has increased significantly compared with that in August. The market supply and demand are under pressure again, and the economic recovery foundation is not firm. At present, the main contradiction of economic operation lies in insufficient employment, weak demand and unstable expectation. Therefore, the focus of policy implementation should focus on promoting employment, providing subsidies and boosting demand. And through the transmission of policy signals to cultivate the confidence of market participants.