China'S Service Sector PMI Fell To 48.4 In October, The Lowest Since June

In October, the service industry continued the contraction trend in September, and the outlook further declined.

The Caixin China general service industry operating activity index (PMI) in October, released on November 3, recorded 48.4, lower than 0.9 percentage point in September, falling to the contraction range for the second consecutive month, the lowest since June.

In October, Caixin's PMI of China's manufacturing industry rebounded 1.1 percentage points to 49.2, still in the contraction range; However, affected by the service industry, Caixin China's comprehensive PMI fell 0.2 percentage points to 48.3, the lowest since June.

Caixin's PMI trend of China's manufacturing industry is not consistent with that of the National Bureau of statistics, while the trend of service industry and comprehensive PMI is the same as that of the National Bureau of statistics. The PMI of the National Bureau of statistics fell to below 10.9% of the PMI for the first time since the National Bureau of Statistics reported that the PMI of the service sector fell to 10.9% below the critical value of 10.9%.

From the sub data, affected by the health events, the production and demand of the service industry shrank for the second consecutive month, and the new order index rose slightly in the contraction range. After a brief expansion in September, the new export order index fell below the boom and bust line again, and was the lowest since June, indicating that the external demand of the service industry weakened.

Despite weak supply and demand, employment in the service sector expanded for the first time in the year. The employment index rose to an expanding range in October, the highest since June 2021. The respondents reflected that this was related to the expansion of production capacity and the acceleration of sales. However, restricted by health events, the backlog index was higher than the critical value for the third consecutive month.

Supported by rising costs such as oil prices and wages, the service industry input price index remained in the expansion range in October, but declined slightly. Affected by rising costs, the ex factory price index rose above the critical point, the highest in nearly eight months, slightly higher than the long-term average since 2005.

The confidence of service industry enterprises improved slightly, and the business expectation index rose from the 6-month low in September, but still lower than the long-term average. Many enterprises believe that there will be a strong post epidemic recovery in the coming year. However, some enterprises are worried about the uncertainty of health events and prevention and control measures, or the impact on business activities and market demand.

Wang Zhe, a senior economist at Caixin, said that the outlook of manufacturing and service industries continued to decline in October, supply and domestic and external demand all contracted, and enterprise costs rose. At present, the internal and external situation is still complex and severe, and the adverse factors affecting economic development are increasing. In particular, the distribution of health events in many places has obviously restricted both supply and demand, and the foundation for economic recovery is not firm. The party report emphasizes that "development is the first priority of the party in governing and rejuvenating the country", which helps to stabilize the long-term expectation of the market; At present, demand and employment are still under pressure, and the corresponding policies to promote employment and stabilize domestic demand need to be strengthened. As mentioned in the report, "we should strengthen the coordination of fiscal and monetary policies, focus on expanding domestic demand, and enhance the fundamental role of consumption in economic development and the key role of investment in optimizing the supply structure."