Caixin China Composite PMI™ data (which covers both manufacturing and services) pointed to a broad stabilisation of Chinese business activity in October. This was highlighted by the Caixin Composite Output Index posting only fractionally below the neutral 50.0 value at 49.9, up from September’s 80-month low of 48.0.
October survey data signalled that a stronger increase in service sector business activity was offset by a further decline in manufacturing output.
That said, goods producers recorded the slowest rate of contraction for four months. Meanwhile, services activity rose at a quicker rate, one that was the most pronounced since July. This was shown by the Caixin China General Services PMI posting 52.0 in October, up from September’s 14-month low of 50.5. Nonetheless, the latest reading was indicative of only a modest rate of growth that was slower than the historical average.
Service sector companies saw a further rise in total new business during October. In line with the trend for activity, the rate of new order growth picked up from September’s recent low and was solid overall. Panellists that reported greater volumes of new work generally linked this to improved underlying client demand. In contrast, new business placed at manufacturing companies continued to decline, though at a slower rate than in September. Overall new business rose for the first time in three months, albeit fractionally.
Service providers in China continued to add to their payroll numbers in October. The rate of job creation was modest overall, despite edging up to a three-month high. Moreover, employment growth at services companies was not sufficient to offset a further fall in manufacturing staff numbers. Consequently, employee headcounts at the composite level continued to decline in October, though at the slowest rate since July.
October data signalled a reduced amount of unfinished work across China’s service sector, but the rate of depletion was only slight. According to panellists, lower than expected sales had contributed to falling backlogs. In contrast, manufacturing work-in-hand increased for the sixth month running, resulting in a first rise at the composite level since March.
Service providers cut their selling prices for the second month in a row, albeit only fractionally. Manufacturing selling prices also decreased during October. Falling charges in the service sector were recorded in spite of a further increase in cost burdens, the sharpest in eight months. In contrast, a sharp fall in input costs at manufacturing firms meant that composite input prices continued to decline.
Business sentiment at services companies eased to the lowest in ten years of data collection. Relatively soft market conditions and an uncertain economic outlook had reportedly dampened optimism towards the outlook for activity over the coming year.