March Caixin China service industry PMI rose to 54.4

Release time:

2019-04-04

The March Caixin China General Service Industry Business Activity Index (Service Industry PMI) announced on April 3 recorded a 54.4, rebounding 3.3 percentage points from the February low, setting a new high since February 2018.

The previously announced March Caixin China manufacturing PMI rebounded by 0.9 percentage points to 50.8, the first time in four months in the expansion range. Both industries grew significantly, driving Caixin's comprehensive PMI to rebound by 2.2 percentage points to 52.9, the highest since July 2018.

Caixin China's services and composite PMI trends are in line with the Bureau of Statistics PMI. The business activity index of the service industry released by the National Bureau of Statistics in March was 53.6, a slight increase of 0.1 percentage points; the composite PMI recorded a 54.0, an increase of 1.6 percentage points from the previous month.

Demand for services and manufacturing picked up in tandem in March. The total number of new orders in the service industry accelerated, hitting the highest growth rate in 14 months. Some enterprises reflected the improvement in demand and the release of new products led to a rebound in the total number of new orders; the total number of new orders in the manufacturing industry also accelerated slightly, but the growth rate was still low. Combined, new orders grew moderately in March.

External demand has also improved. New export orders in the manufacturing industry reversed the contraction in February and rebounded slightly; new export orders in the service industry also recorded the second highest growth rate since December 2017. The two major industries combined, and the total amount of new export orders increased slightly.

The two major industries are also in the expansion range. The scale of employment in the service industry continued to rise slightly, with a growth rate close to February, while manufacturing employment expanded for the first time in more than five years, but the growth rate was still small. Taken together, the combined workforce expanded for the first time in more than a year in March, but the growth rate was only modest.

The increase in service sector input costs slowed slightly in March from February and remained moderate overall. The manufacturers surveyed reported that the increase in costs was mainly related to rising raw material prices, transportation and salaries. Manufacturing input costs rose for the first time in four months, but the increase was only modest. The two major industries combined, input costs continue to rise slightly.

Prices continued to rise in March. According to many companies, rising input costs and stronger customer demand have collectively led to higher ex-factory prices. Among them, the manufacturing factory prices rose slightly, the highest increase in five months. The service sector also continued to raise fees slightly, with increases similar to those in February.

With the improvement of demand, the confidence of enterprises in the two major industries in the production and business prospects in the next 12 months has improved slightly. Optimism in the service sector hit a three-month high and manufacturing hit a 10-month high, but confidence in the outlook for the two industries remains weak compared to long-term averages.

Zhong Zhengsheng, chairman and chief economist of Monita Research, a Caixin think tank, said that China's economic prosperity has been significantly repaired in March, especially reflected in the improvement of demand and the significant improvement of manufacturing employment. However, entrepreneurs' confidence is still cautious, and the momentum of price rise is insufficient. It remains to be seen whether China's economy will stabilize in real terms.

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