
Caixin says China’s services PMI dropped to a 3-month low in January
- Caixin says China’s services PMI dropped to a 3-month low in January.
- Caixin revealed China's services PMI at 51.8 in January versus 52.5 in December.
- China’s economic growth was reported to have approached a 30-year low.
- Employment sub-index dropped to a 16-month low in January.
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January usually marks a busy season in terms of sales. According to a private-sector survey, however, China’s services sector purchasing managers’ index (PMI) dropped for the second month in a row in January. Wednesday’s data highlighted new orders to have declined with companies having cut prices that led to a 3-month low in services PMI.
The Caixin/Markit services PMI was announced at 51.8 for January from a higher reading of 52.5 in December. January’s figure, however, was pronounced better than the 8-month low reported in October. The reading was also only marginally lower than the analysts’ estimate of 52.0 for January.
Services Sector Accounts For Over 50% Of China’s Economy
Copy link to sectionDespite the U.S – China phase 1 trade deal and added stimulus from China’s central bank, the services sector continues to struggle. Accounting for over 50% of the largest Asian economy, January’s data still doesn’t reflect the full impact of the Coronavirus outbreak that is likely to weigh on the economy further in the upcoming months.
Printing above 50, however, the index remained out of contraction in January. China has lately been dependent on its services sector to offset the slowdown in investment and manufacturing sector at large. The services sector also helped the country in the past to create additional jobs for people who were laid off in other sectors.
Owing to falling demand both domestic and foreign, China’s economic growth was reported to have approached a 30-year low. Caixin’s survey focuses on small and middle-sized enterprises in China versus the official services PMI that focuses on the larger businesses and state-owned companies. Activity in China’s service sector was earlier reported to have improved in the official data.
Employment Sub-Index Dropped To A 16-Month Low
Copy link to sectionReduction on the new work’s front along with higher prices for labor and fuel were cited among a few of the reasons to have kept the services sector under pressure in January. While foreign new orders were reported to have improved slightly as compared to December, domestic demand continued to point downwards.
The employment sub-index of the services sector PMI, as per Caixin, touched a 16-month low in January. Furthermore, profit margins got a hit as well since companies opted for reducing selling prices.
While the business activity outlook for one year improved significantly in January owing to the phase 1 trade deal with the U.S, the recent Coronavirus crisis has the potential to mute the optimism again in the upcoming months.
The forex market didn’t respond aggressively to the economic data on Wednesday with USD/CNY continuing to trade around 7.0 against the greenback.
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