China's Service Sector Outlook Bright in January... Private Indicators Expand

Caixin Services PMI at 52.7
Above the Benchmark (50) for 13 Consecutive Months

Expectations that China's service sector will improve continue to appear in private indicators.

On the 5th, Chinese economic media Caixin reported that the Caixin Services Purchasing Managers' Index (PMI) for January was recorded at 52.7. Although this figure is lower than both the previous month's figure (52.9) and the forecast (53.0), it has exceeded the baseline (50) for 13 consecutive months, raising hopes for expansion.

[Image source= Xinhua News Agency]

The Services PMI is a key leading indicator for understanding the real economy; a reading above the baseline of 50 indicates economic expansion, while below 50 indicates contraction. Since January last year (52.9), the index has consistently stayed above the baseline. The official PMI calculated by the National Bureau of Statistics focuses on large state-owned enterprises, whereas the Caixin PMI includes export companies and small and medium-sized enterprises, making it more comprehensive.

Wang Zhe, Chief Economist at the Caixin Think Tank, pointed out, "Current economic difficulties and pressures remain relatively significant, with many adverse factors and uncertainties," adding, "The pattern of demand being weaker than supply, high employment pressure, and weak market expectations have not fundamentally changed." He continued, "Policy efforts should focus on employment, income growth, and improving expectations," emphasizing, "There is still room for fiscal and monetary policies, and the intensity of related policies should be further increased."

Wang also stressed, "Importantly, policies need to strengthen effective communication and positive interaction with the market, and various departments should enhance coordination and cooperation to increase the consistency of market expectations."

Earlier, the National Bureau of Statistics released the January China Non-Manufacturing (Services) PMI, which stood at 50.7, exceeding both the previous month's figure (50.4) and the forecast (50.6). This measure of the service sector has not fallen below the baseline since December 2022 (41.6).

On the other hand, the manufacturing PMI announced by the National Bureau of Statistics on the 31st of last month was 49.2, below the forecast (49.3), continuing a contraction phase for the fourth consecutive month. However, the private Caixin Manufacturing PMI was recorded at 50.8, showing expansion for the third consecutive month and matching expectations, revealing a divergence from the official indicator.

This content was produced with the assistance of AI translation services.