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Output growth eases across both manufacturing and service sectors in China

Staff Writer | April 5, 2018
The Caixin China Composite PMI data (which covers both manufacturing and services) indicated that total Chinese business activity expanded at the slowest pace for four months at the end of the first quarter.
China service
China   Caixin China General Services PMI
Notably, the Composite Output Index fell from 53.3 in February to 51.8 in March, to signal only a modest pace of expansion.

The dip in the headline index was driven by weaker increases in output across both the manufacturing and service sectors during March.

Furthermore, rates of growth slipped to four-month lows in both sectors.

At 52.3 in March, the seasonally adjusted Caixin China General Services Business Activity Index fell further from January’s multi-year peak, having slipped from 54.2 in February.

The latest reading pointed to a modest increase in services activity that was softer than the long-run trend.

Growth in manufacturing output was also slightly weaker than that seen on average over the series’ 14-year history.

In line with the trend for activity, manufacturers and service providers both noted slower upturns in new order volumes during March.

Moreover, rates of growth were identical and modest across both sectors.

Services companies generally linked higher sales to new client wins and new offerings, but some cited concerns over exchange rate movements and lower tourist numbers.

Consequently, softer rises across both monitored sectors led to the slowest expansion in composite new business for six months at the end of the first quarter.

Employment trends deteriorated across both sectors during March.

Services companies added to their payrolls at a marginal pace that was the weakest in the current 19-month sequence of expansion.

At the same time, job shedding intensified at goods producers, with workforce numbers declining at the fastest rate since last August.

As a result, composite employment fell for the first time since last October, albeit at a marginal pace.

Outstanding business increased slightly at services companies, following broadly stagnant backlogs over the opening two months of the year.

Meanwhile, unfinished workloads increased for the twenty-fifth month running at manufacturers, and at a stronger rate than in February.

At the composite level, the amount of work-in-hand (but not yet completed) rose at a pace that, though modest, was the second-fastest since January 2017.

Services companies based in China signalled a further increase in input costs during March.

That said, the rate of inflation was the slowest recorded for four months and moderate overall.

Cost burdens also increased at a weaker pace across the manufacturing sector, where prices rose to the least extent for nine months.

Overall, input costs grew at the softest pace since last July.

Chinese companies continued to increase their selling prices in March as part of attempts to pass on higher cost burdens to clients.

Although both manufacturers and services companies recorded slightly faster rates of charge inflation compared to February, increases were modest overall.

While the level of positive sentiment strengthened to a one-year high at manufacturers, optimism across the service sector dipped to a sixmonth low in March.

At the composite level, business confidence edged up fractionally to the highest for nine months.