Caixin China Composite PMI™ data (which covers both manufacturing and services) showed a further solid increase in Chinese business activity in November. The Composite Output Index was unchanged from October’s 43-month record of 52.9 in November.
Services companies based in China saw a solid increase in business activity during November, which offset a slight slowdown in the rate of output expansion across the manufacturing sector. Furthermore, the seasonally adjusted Caixin China General Services Business Activity Index rose from 52.4 to reach a 16-month high of 53.1 in November.
According to panellists, the commencement of new projects and higher new orders contributed to increased activity at service providers. That said, the rate of new business growth weakened slightly from the four-month high seen in October and was moderate overall. Manufacturers also saw their new order books expand at a slower pace in November, after increasing at the fastest rate in over two years in October. Overall, the amount of new work placed with Chinese businesses increased for the ninth month in a row and at a moderate pace.
In order to support higher activity, services companies raised their staffing levels for the third successive month in November. The rate of job creation, though modest, was the fastest seen in a year-and-a-half. At the same time, manufacturers cut their staff numbers at the slowest pace in 18 months. Stronger services employment growth broadly offset job cuts at manufacturers, and therefore composite employment was little-changed from the previous month. Furthermore, the fractional reduction in total employment was the weakest seen since the current sequence of job shedding began in June 2015.
Unfinished workloads at services companies rose for the second month running in November, though the rate of increase was little-changed from October’s fractional pace. Goods producers also noted a further rise in backlogs of work, with the rate of accumulation edging up slightly from the previous month. At the composite level, outstanding business rose at a modest pace that was identical to that seen in October.
Price pressures were relatively muted at service providers in November. Despite rising to a 21-month high, the rate of cost inflation across the service sector was only modest overall, and weaker than the historical average. Companies that reported higher cost burdens generally commented on increased raw material prices and labour costs. In contrast, manufacturers saw a sharp and accelerated rise in total input prices in November, with the rate of inflation the highest for over five-and-a-half years. This contributed to a steep increase in composite input costs, which rose to the greatest extent since April 2011.
Latest survey data saw a further marginal increase in prices charged for Chinese services in November, as has been the case in each of the past eight months. In line with the trend for input costs, manufacturers raised their selling prices sharply over the month in a bid to help protect their margins. Therefore, the rate of composite charge inflation quickened to a solid rate that was the fastest since February 2011.
Optimism towards future growth prospects moderated to a 13-month low at services companies in November. While some panellists expect company expansion plans and further increases in new orders to support future activity, others commented on relatively subdued market conditions.