Caixin China Composite PMI™ data (which covers both manufacturing and services) pointed to a further increase in total Chinese business activity during May. However, the Composite Output Index posted 50.5, down from 50.8 in April, to signal the slowest rate of expansion in the current three-month sequence of growth.
May survey data indicated that overall Chinese business activity growth weakened for the second month in a row, as services activity expanded at a slower rate and manufacturers reported a fractional fall in production for the second consecutive month. Furthermore, it was the weakest increase in service sector business activity since February, with the Caixin China General Services Business Activity Index registering 51.2 in May, down from 51.8 in the previous month.
Reflective of the trend for service sector business activity, new business placed at service providers also rose at a slower pace in May. Furthermore, the rate of increase was modest and remained slower than the historical average. Some monitored firms commented that new product launches had helped to lift sales in the latest survey period. In contrast, total new orders at goods producers declined for the first time in three months during May, albeit only slightly. As a result, composite new business rose marginally in May, with the latest increase the slowest since February.
Service sector employment rose for the second month running in May, though the rate of job creation remained marginal overall. Some companies mentioned that restructuring plans had acted as a brake on staff hiring. Meanwhile, further steep job cuts were registered across the manufacturing sector in the latest survey period. As a result, employment at the composite level fell again in May, and at the same modest pace as recorded in April.
Volumes of unfinished work at Chinese services companies rose for the second successive month in May, albeit at a fractional pace. The level of work-in-hand (but not yet completed) also rose marginally across manufacturing firms in the latest survey period
Cost pressures eased across both the manufacturing and service sectors in May. Input price inflation weakened to only a modest pace at service providers, with the rate of increase remaining slower than the series average. Growth in manufacturing cost burdens also slowed in May, with the sector also recording a modest rise in input prices overall.
May data indicated that both monitored sectors raised their output charges, with a number of companies increasing their prices due to higher cost burdens. However, services companies increased their selling prices at a marginal rate that was identical to that seen in April. Charge inflation meanwhile slowed across the manufacturing sector and was modest overall.
Service sector optimism towards the 12-month business outlook dipped to its lowest level in 2016 so far in May. A number of companies forecast that improving client demand and planned company expansions will support higher business activity over the next year, but there were reports that an uncertain economic outlook weighed on the overall level of business confidence.