In June, Caixin China'S Service Industry PMI Recorded 50.3, Falling To The Lowest In 14 Months

Affected by the rebound of the epidemic situation in some parts of Guangdong Province, the demand of residents was restrained in June, leading to the weakening of the expansion of China's service industry. The PMI (Purchasing Manager's index) of Caixin's service industry in June 2021, released on July 5, recorded 50.3, down 4.8 percentage points from May, the lowest in 14 months. Although still in the expansion range, the growth rate slowed down significantly.

Previously announced, Caixin China's manufacturing PMI recorded 51.3% in June, 0.7% lower than that in May. Affected by the slowdown of manufacturing and service PMI, Caixin China's comprehensive PMI in June was 50.6, lower than 3.2% in May, and also slowed to the lowest in 14 months.

This trend is consistent with the National Bureau of statistics PMI. The PMI of manufacturing industry in June 2021 released by the National Bureau of statistics was 50.9, lower than 0.1 percentage point in May; The business activity index of the service industry decreased by 2.0 percentage points to 52.3, while the comprehensive PMI output index fell by 1.3 percentage points to 52.9.

From the breakdown data, the growth of new orders in the service industry slowed to the lowest in 14 months in June. According to the survey enterprises, the recent epidemic situation has risen and the number of trips has decreased, which has inhibited the overall growth of orders in the service industry. However, the index of new export orders in the service sector has returned to above the boom and bust line, but the degree of expansion is limited. The index of new orders in the manufacturing industry also fell. From the perspective of the two major industries, the index of new orders in June slowed to the lowest in 14 months.

Due to the control of raw materials and labor costs, the service industry input price index in June dropped significantly from the recent high in May and set a record low in nine months. The input price index of manufacturing industry also fell sharply. Although the comprehensive input cost was still in the expansion range, it fell to the lowest in eight months.

Due to the decrease of enterprise costs and the suppression of travel demand by the epidemic situation, the service enterprises' charge prices in June ended the upward trend of 10 months before and fell back, and the toll price index fell into the contraction range. The interviewed enterprises said that the price reduction was to attract new business. However, the ex factory price index of the manufacturing industry is still in the expansion range, driving the comprehensive output price to rise only slightly.

Service sector employment contracted for the first time in four months in June as business demand fell. Although the employment index of manufacturing industry increased slightly in the expansion range, the rebound of manufacturing employment was offset by the contraction of service industry, and the total employment of the two industries still decreased slightly.

Although China's service enterprises are still optimistic about their business prospects in the coming year, with the outbreak of the epidemic again, the overall optimism dropped sharply in June, and the industry confidence fell to a nine month low. Many companies believe that the epidemic will be brought under control and that market conditions and global demand will further recover in the future.

Wang Zhe, a senior economist at Caixin think tank, said that the expansion trend of manufacturing and service industries in June was still maintained, and the inflation pressure was eased temporarily. However, affected by the recent local epidemic, the service industry was more vulnerable. Since the outbreak of the epidemic, the manufacturing industry has gradually returned to normal, while the service industry is still more sensitive to the epidemic situation. After entering the second half of the year, as the low base effect continues to weaken, economic downturn and inflation pressure interweave, which is still a serious challenge.