In July, Caixin China'S Service Industry PMI Recorded 54.1, Down 4.3 Percentage Points

The Caixin China general service industry business activity index (PMI) in July, released on August 5, recorded 54.1, 4.3 percentage points lower than the 10-year high in June. It was in the expansion range for three consecutive months, indicating that although the expansion speed of the service industry slowed down after the epidemic, the trend of rapid recovery did not change.

Previously, Caixin's purchasing managers' index (PMI) of China's manufacturing industry in July was 52.8, up 1.6 percentage points from June. As the decline in PMI of service industry was greater than that of manufacturing industry, the comprehensive PMI of Caixin China decreased by 1.2 percentage points to 54.5 in July.

This trend is consistent with the Bureau of statistics PMI. The business activity index of service industry released by the National Bureau of statistics fell 0.3 percentage points to 53.1, while the comprehensive PMI fell slightly by 0.1 percentage point to 54.1.

Although the new order index of service industry decreased slightly in July, it was in the expansion range for three consecutive months. Enterprises generally reported that with the continuous recovery of the economy from the epidemic, the market situation has improved. Affected by external demand, the new export order index of service industry returned to the contraction range. However, supported by the continued rise in manufacturing orders, the composite new orders index recorded the highest since the beginning of 2011, and the decline in the total number of comprehensive new export orders narrowed.

In July, service enterprises continued to reduce employment, and the employment index of service industry was in the contraction range for six consecutive months, but the decline was the lowest in half a year. Some of the enterprises interviewed said that some employees did not fill the vacancies after leaving their posts, while others reflected that the unit was aimed at improving efficiency and that cost control was also a factor in the decline in employment. The manufacturing sector also contracted in July. Overall, the two major industries continue to reduce employment, but the decline rate is narrowed.

Affected by the increase of new orders, the backlog of service enterprises increased slightly in the expansion range, and the backlog of manufacturing enterprises also increased slightly, which led to the rise of comprehensive backlog.

In July, the price of service inputs increased for the first time in nearly three months, and the main reason was the rise of labor costs. The purchasing price index of raw materials in the manufacturing industry has also been in the expansion range for two consecutive months. Combined with the two, the comprehensive input cost has increased significantly.

In response to the moderate price reduction from customers in July, as well as a moderate decrease in service charges from enterprises. Manufacturers continued to raise prices slightly, leading to a slight increase in the price of comprehensive output.

Since last month, the degree of optimism in the manufacturing sector will rise to the highest level since April 2015, but the service industry will remain at a higher level as the recovery of the epidemic situation is expected to continue in July.

Wang Zhe, a senior economist at Caixin think tank, said that the trend of synchronous recovery of manufacturing and service industries remained unchanged in July, and the recovery of manufacturing industry was more stable. However, foreign demand and employment are still not optimistic, and the repeated overseas epidemic situation keeps the export under pressure. The employment problem is still the top priority, and the combination of "demand expansion, production expansion and employment contraction" has appeared for several consecutive months. The continuous improvement of employment requires enterprises to have longer time and stronger confidence.