China'S Service Industry PMI Fell To A New Low Of 46.7 In November

The tightening of epidemic prevention and control measures has significantly disturbed the service industry more than the manufacturing industry. In November, the landscape of the service industry further declined in the contraction range.

The Caixin China's general service industry business activity index (service industry PMI) for November, announced on December 5, recorded 46.7, 1.7 percentage points lower than that in October, and was below the critical point for three consecutive months, which was the lowest since June.

The previously announced Caixin China manufacturing PMI rose 0.2 percentage points to 49.4 in November, continuing the contraction trend since August; Mainly due to the weak service industry, Caixin China's comprehensive PMI fell 1.3 percentage points to 47.0 in November, also the lowest since June.

The trend of manufacturing PMI of Caixin China is not consistent with that of the National Bureau of Statistics, while the trend of service industry PMI and comprehensive PMI is the same as that of the National Bureau of Statistics. Previously, the PMI of manufacturing industry fell 1.2 percentage points to 48.0 in November, and the PMI of service industry fell 1.9 percentage points to 45.1, driving the comprehensive PMI down 1.9 percentage points to 47.1, indicating the accelerated contraction of production and business activities.

From the sub data, with the tightening of epidemic prevention and control measures and the increase of confirmed cases, the production and demand of the service industry shrank for the third consecutive month in November, the largest decline since the last round of epidemic peak. On the contrary, the index of new export orders rose to the expansion range in that month, the second expansion in 2022. The interviewed enterprises said that the improvement of exports was mainly due to the relative improvement of market conditions and the relaxation of restrictions on international travel, but the weak global economy continued to inhibit business growth.

The employment situation in the service industry briefly improved in October, and contracted again in November. The employment index fell to the lowest level since November 2005 when this sub item of statistics was available. According to the survey, the epidemic prevention and control measures have led to travel restrictions in some areas and the inability of personnel to go to work. At the same time, the decline in business demand of enterprises has also taken the initiative to tighten employment. In addition, the index of business backlog in November also rose to the highest level since June in the expansion range.

Driven by the rising costs of raw materials, transportation and labor, the cost of the service industry is still increasing. In November, the input price index fell slightly in the expansion range; Cost pressure continued to transmit to the sales side, but due to insufficient demand, the pricing ability of enterprises was limited, and the ex factory price index of the service industry also fell back, only slightly above the critical point.

Market confidence was frustrated, and the service industry business expectation index in November fell to the lowest level in nearly eight months, which remained below the long-term average. The surveyed enterprises believe that the output will rebound with the improvement of the epidemic situation, and the business will return to normal. However, the impact of the epidemic situation and related epidemic prevention measures on production capacity and demand is still uncertain, which brings some concerns.

Wang Zhe, senior economist of Caixin, said that at present China is in the third wave of epidemic at the beginning of 2020 and after the first half of 2022, and the epidemic continues to have a negative impact on the economy. At present, the restrictions on both sides of supply and demand in the third wave of the epidemic are weaker than those in the first two waves, but the deterioration of the employment market is more prominent. Since October, the epidemic has spread in many provinces and cities. How to balance the prevention and control of the epidemic and economic development has again become a core issue. Recently, the central government made important arrangements and made clear requirements for further optimizing the measures of prevention and control, and how to implement them became the top priority.

He said that under the triple pressure of shrinking demand, supply shock and weakening expectations, the employment index has been at a low level for a long time. The employment downturn and the triple pressure have formed negative feedback. The market's requirements for policies to promote employment and stabilize domestic demand are particularly urgent. At the policy level, we should strengthen the coordination between fiscal and monetary policies, focus on expanding domestic demand, and raise the income level of low-income groups.