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A private gauge of China's Services activity in August; fell to a post-Covid-19 low as heavy floods, a resurgence in Covid cases and power shortages in some cities weighed on output and new orders. China Caixin/Markit PMI Services for August fell to 46.7 (expected 52.6, prior 54.9)

China Service Economy Falls

China Caixin/Markit PMI Services for August

  • Services 46.7 expected 52.6, prior 54.9
  • First time that services activity shrank since April 2020

Caixan August 21 Services

Comments from Markit report:

Commenting on the China General Services PMI ™ data, Dr. Wang Zhe, Senior Economist at Caixin Insight Group said:

"The Caixin China General Services Business Activity Index plunged to 46.7 in August from 54.9 the previous month. It was the first time that services activity shrank since April 2020, reflecting disruptions caused by the Covid-19 flare-ups that appeared in parts of China starting in late July.

"In the services sector, supply and demand both shrank. The gauges for business activity and total new business plummeted into contractionary territory for the first time in 16 months, with supply falling at a steeper pace than demand. Exports remained stable overall, though surveyed enterprises said the recent outbreaks had hurt foreign trade. The gauge for new export business was slightly above 50.

"The job market for services weakened as the measure for employment fell into negative territory for the second time in three months, though the drop was slight. Companies cut staff and outstanding business grew.

"Service costs were still under great pressure amid elevated labor and transportation costs amid the Covid-19 resurgence. In August, input costs rose for the 14th consecutive month. Meanwhile, sluggish market demand limited businesses' bargaining power, causing prices charged by service providers to slip after a month of growth.

"Businesses remained optimistic. In August, the measure for business expectations was 3 points lower than the long-term average. Surveyed firms hoped that the outbreaks could be contained quickly so they could see business improve."

China Caixin/Markit PMI Composite for August

  • Composite 47.2 prior 53.1
  • Business activity and new orders both fall amid uptick in COVID-19 cases
  • Companies reduce their staffing levels slightly
  • Input costs rise at slower pace, output charges decline

Caixan August 21 Composite

Comments from Markit report:

Commenting on the China General Composite PMI ™ data, Dr. Wang Zhe, Senior Economist at Caixin Insight Group said:

"The Caixin China General Composite PMI came in at 47.2 in August, lower than 53.1 the previous month and the first drop into contractionary territory since April 2020. Supply, total demand, overseas demand and employment all shrank, indicating the immense pressure on the services sector stemming from the reappearance of Covid-19.

"The Covid-19 resurgence has posed a severe challenge to the economic normalization that began in the second quarter of 2020. Both manufacturing and services shrank in August, with the latter hit harder than the former. Supply fell and demand was under pressure along with exports. The job market weakened slightly, though it managed to maintain stability overall. Inflationary pressure remained high as raw material prices were still high and measures to counter the outbreaks pushed up transportation costs. Surveyed manufacturers and service providers were only moderately optimistic about the economic outlook.

"Official economic indicators for July were worse than the market expected, indicating mounting downward pressure on economic growth. Authorities need to take a holistic view and balance the goals of containing Covid-19, stabilizing the job market, and maintaining stability in prices and supply.”

Caixin Media Co. and researcher Markit said Friday. July's reading was the lowest since April 2020 and fell under the 50 mark that separates expansion from contraction. The result points in the same direction as a competing official gauge that tracks large state factories more closely from China's statistics bureau said Saturday.

The official survey has a much larger sample than the Caixin survey.

Source: Markit

From The TradersCommunity News Desk

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