Caixin December services PMI at 50.2, lowest since July 2014

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 6, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Mumbai) - Caixin PMI data showed activity in China's services sector in December expanded at its slowest rate in 17 months. The Caixin/Markit PMI dropped to 50.2 in December from 51.2 in November; the lowest reading was the lowest since July 2014.

    The latest data dimmed hopes that policy makers’ attempt to restructure the economy with more emphasis on services and consumption will offset the drag from weakness in the manufacturing sector. He Fan, chief economist at Caixin Insight Group feels the government must “gradually relax restrictions in the sector” given the latest setback suffered by this sector.

    New business fell to 50.6 in December from November's 51.1 on subdued demand. The overall costs rose due to higher salaries given to employees in service sector firms.

    The service sector had supported the economy over the last year as the growth in the sector helped to offset the negative impact of the drag from slump in manufacturing.

    The services PMI figure is closely watched by investors as Beijing attempts to rebalance its economy away from the manufacturing sector. At the 5th plenum it was decided that China will gradually move towards a more consumer led growth model. The service sector growth is crucial to President Xi Jinping's administration which looks to replace investment and exports with consumption as the primary growth driver.

    Caixin’s service PMI is in sharp contrast to the official figures which showed activity picked up in December to a 16-month high of 54.4. The contrasting results of the official and private survey have sent "very, very mixed signals" according to Johanna Chua.,Citigroup's head of Asia Pacific economic and market analysis.

    Caixin manufacturing PMI was disappointing as well. The Caixin PMI data which focuses on smaller and medium-sized companies showed manufacturing PMI fell to 48.2 in December, down from 48.6 registered in November, contracting for a tenth month. It came in below the 49.0 figure broadly expected by analysts raising fears of a slowdown of the economy.
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