According to the latest survey data released by China Caixin. com, the economic activity of the service industry in China slightly increased in October, but the sales growth rate was the slowest in 10 months. With the low confidence of the industry, the employment situation has also stagnated.
Caixin announced on Friday (November 3rd) the Caixin China Service Industry October Purchasing Managers' Index (PMI), which found a slight increase from the lowest level of 50.2 in September and reached 50.4 in October. The increase is much lower than the average in the first half of this year.
50 is the boom and bust line of PMI, with an index higher than the boom and bust line, reflecting an upward or improving trend in economic conditions; Below the boom and bust line, it indicates that the economic situation is tending to decline or decline.
The service industry in China is becoming increasingly large, and currently provides 48% of the employment opportunities in the Chinese job market. At the beginning of this year, China's service industry rebounded significantly, but analysts believe that the slowdown in household income growth and increased uncertainty in the job market have placed a question mark on the sustained expansion of China's service industry.
The official data released by the National Bureau of Statistics on Tuesday shows that the purchasing managers' index of China's service industry has dropped from 50.9 in September to 50.1 in October.
The basic preparation method for China's official PMI and Caixin PMI is the same, both of which conduct monthly surveys of enterprise procurement managers, covering various stages of enterprise production such as procurement, production, and logistics. Based on this, they are summarized and compiled.
Both PMIs have five main sub indices, namely new orders, production, employees, supplier delivery time, and raw material inventory.
The biggest difference between the official and Caixin PMIs is the different survey samples. The official PMI survey targets more than 3000 enterprises nationwide, the vast majority of which may be state-owned enterprises; The survey subjects of Caixin PMI are over 400 enterprises, the vast majority of which may be small and medium-sized enterprises in coastal areas of China.
Due to the varying nature and quantity of survey subjects, the PMI released by the two surveys may sometimes tend to be consistent, but sometimes they may contradict each other. However, overall, both surveys reflect the true direction of China's economy.
"The service industry closely related to the employment of young people has recovered to the level of 90% before the COVID-19 epidemic," said Xing Zhaopeng, senior strategist of ANZ in China, quoted by Reuters.
However, Xing Zhaopeng also pointed out that "the service industry is unlikely to see expansion beyond expectations
According to a Caixin survey, the growth in the number of new orders in China's service industry in October was the slowest in 10 months, offsetting the benefits of a surge in tourism activities during China's National Day holiday.
However, due to the increase in overseas tourists visiting China, the overseas demand for China's service industry continues to rise, Reuters reported.
The slowdown in sales growth in the service industry has led companies to be more cautious in hiring. After monthly growth in the service industry in the previous 8 months, there was no change in employment in October.
Due to weak demand, the overall optimism of the economy has declined for four consecutive months, reaching a new low since March 2020.
Reuters pointed out in the report that service companies have also taken action on price increases, mainly because they seek to pass on the increased input costs to consumers, but the growth rate of input costs is the slowest since June 2022.
The Caixin Composite PMI, which includes dual economic activities in manufacturing and service industries, decreased from 50.9 in September to 50 in October, which is also the lowest reading since December 2022.
Compared to the service industry, the market situation in the manufacturing industry is worse, "Reuters quoted Wang Zhe, a senior economist at Caixin Think Tank, as saying.
The Chinese economy performed better than expected in the third quarter, but economists believe that the continued weakness of the real estate industry, sluggish travel demand, local government debt crisis, and geopolitical tensions may all cast a shadow over China's economic prospects.