Daily Management Review

Caixin PMI Shows Four Month Low Growth in February for Chinese Service Sector


03/03/2017




Caixin PMI Shows Four Month Low Growth in February for Chinese Service Sector
A private survey in China showed that increasing competition has been making it harder for companies in China to raise prices and therefore, even with new business still growing at a solid rate, activity in the country’s services sector expanded at the slowest pace in four months in February.
 
While the findings of the private survey contrasted with an unexpected pick-up in growth in its manufacturing sector as export orders rebounded., it essentially echoed a similar softening in growth in China's official services activity survey released on Wednesday
 
The Markit/Caixin services purchasing managers' index (PMI) showed that from 53.1 in January, the February services PMI dipped to 52.6 in February on a seasonally adjusted basis.
 
It was the slowest rate of expansion since October even while the index remained well above the 50-mark that separates expansion in activity from contraction on a monthly basis.
 
A slowdown in momentum for the entire second largest economy in the world overall is indicated by any signs of flat-lining in services sector growth, which is more dependent on domestic demand.
 
And while the Chinese policy makers have been trying to contain the financial risks created by years of debt-fueled stimulus and at the same time meeting the ambitious growth targets, the data could put policymakers in a dilemma on how make the two objectives meet.
 
As a string of data showed the world's second-largest economy was on steadier footing, the central bank has gradually moved to a tightening bias in recent months.
 
With a potentially a slightly lower target for economic and money supply growth and an emphasis on managing debt risks, the Chinese leaders will announce an economic growth target and other policy priorities at the annual parliamentary meetings starting this weekend being conducted by the Chinese government.
 
A Caixin survey found that prices Chinese firms were able to charge their customers were little changed even thhough inflation in January rose to multi-year highs.
 
And even as their input prices continued to rise, albeit at a slower pace, increased competition had restricted their pricing power, said survey respondents.
 
"Inflationary pressures seemed to have started to ease as price increases in both manufacturing and services continued to weaken," said Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group, in a note with the data.
 
Service companies remained optimistic about growth in the next 12 months  and therefore continued to add job at a solid pace.
 
And as growth in the manufacturing sector accelerated, from the previous month's rating of 52.2, the Caixin's composite PMI, that covers both the manufacturing and services sectors, rose to 52.6 in February.
 
"The Chinese economy is expected to maintain the growth momentum in the first quarter of this year. But signs of weakening may emerge from the second quarter," said Zhong.
 
(Source:www.reuters.com) 






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