Caixin China Composite PMI™ data (which covers both manufacturing and services) signalled a further increase in Chinese business activity during July. That said, the Caixin Composite Output Index posted only fractionally above the neutral 50.0 mark at 50.2, down from 50.6 in June, and pointed to the weakest rate of expansion in 14 months.
The slower rate of overall output expansion was predominantly driven by the manufacturing sector, which registered the quickest reduction of output since November 2011. This contrasted with a further increase in service sector business activity, where the rate of growth accelerated to an 11-month high. This was highlighted by the Caixin China General Services Business Activity Index posting at 53.8 in July, up from June’s recent low of 51.8.
The stronger rise in service sector activity was supported by a further increase in new business volumes in July. Furthermore, the rate of new order growth accelerated to a solid pace that was the second-fastest in eight months. Anecdotal evidence suggested that stronger underlying client demand and new customer wins led to increased new work at service providers. In contrast, new work placed at manufacturers declined solidly in July, after a slight increase in June. As a result, new business at the composite level rose at a fractional pace that was the slowest in the current 15-month sequence of expansion.
Employment at service sector companies continued to increase in July, with a number of surveyed companies attributing growth to planned company expansions. Moreover, the rate of job creation picked up slightly since June. However, staff numbers continued to decline at manufacturing firms, albeit at a slower pace than in the previous month. At the composite level, employment declined for the second month in a row, though only marginally.
Higher workforce numbers helped service providers to reduce their level of unfinished business for the sixth successive month in July, and at a modest rate. Meanwhile, reduced production was linked to a slight increase in the level of work-in-hand at manufacturing companies. Overall, composite outstanding business fell for the fourth successive month, albeit slightly.
Average input costs continued to rise at service providers in July. Although the rate of input price inflation picked up slightly since June, the rate of increase remained slower than the series average. However, a sharp decline in cost burdens faced by manufacturers led to a modest reduction in input prices at the composite level in July.
Service sector companies increased their output charges in July, following a slight reduction in June. Though modest, it was the quickest rate of inflation seen since September 2013. Manufacturers meanwhile discounted their tariffs, and at the sharpest rate in six months.