The Caixin China Composite PMI™ data (which covers both manufacturing and services) pointed to a further marked rise in business activity across China in December, with the rate of expansion picking up since the previous month. Moreover, the Composite Output Index posted up from 52.9 in November to a 45-month high of 53.5 at the end of 2016.
China ended 2016 on a positive note, with both manufacturers and service providers seeing stronger increases in business activity compared to November. While manufacturers saw the quickest rate of output expansion for nearly six years, services companies reported the strongest rise in activity for 17 months. The latter was shown by the seasonally adjusted Caixin General Services Business Activity Index rising from 53.1 to 53.4 in December.
Improved rates of new order growth were also seen across both monitored sectors in December. The pace of new business expansion accelerated to its strongest since July 2014 at manufacturing companies amid reports of improving client demand. At the same time, growth in new work at services companies quickened to a 17-month record. Subsequently, the rate of composite new order growth was the fastest since March 2013.
Despite stronger expansions in activity and new work, service providers increased their payrolls at a softer pace in December. Furthermore, the latest increase in staff numbers was the slowest for three months and modest overall. Meanwhile, job shedding persisted across China’s manufacturing sector, though the rate of reduction was little-changed from November. At the composite level, employment fell slightly in December after broadly stabilising in the previous month.
Following on from fractional increases during each of the prior two months, the amount of backlogged work at Chinese services companies was broadly unchanged in December. In contrast, manufacturing firms saw a solid increase in unfinished workloads, with the rate of accumulation the fastest since July. This led composite outstanding business to rise at the quickest pace since March 2011.
Average input costs rose at steeper rates across both manufacturing and services sectors at the end of 2016. Manufacturers noted the fastest increase in cost burdens since March 2013, while service sector input costs rose at the quickest rate in nearly two years. Companies operating in both sectors suggested that higher raw material costs had underpinned the latest increase in input prices. As a result, overall input prices rose at the most marked pace for 69 months.
Services companies raised their prices charged only slightly in December, amid reports that competitive market pressures had restricted their ability to fully pass on higher input costs. Meanwhile, manufacturers increased their selling prices sharply, despite the rate of inflation softening from the previous month. Consequently, composite prices charged rose at a slower rate than in November, but the latest increase was nonetheless one of the steepest seen since early 2011.
Services companies were generally upbeat towards their growth prospects in 2017. Moreover, the degree of optimism reached a four-month high, with a number of companies linking confidence to forecasts of improving market conditions and company expansions.
If you enjoyed this article, Get email updates (It’s Free)