China PMI comes in on the weaker side of expectations
Services 52.0
- expected 52.6, prior 52.7
Composite 50.6
- prior 51.5
Extensive comments from Markit:
"The Caixin China General Services Business Activity Index fell further to 52 in June from the previous month. Among the gauges included in the survey:
1) The gauge for new business rebounded and was higher than the levels seen for most of last year, likely due to the reacceleration of fiscal policy support. New export business returned to contractionary territory, pointing to subdued foreign demand.
2) The employment measure fell further but remained in positive territory, suggesting that the capacity of the services sector to absorb labor weakened.
3) Gauges for input costs and prices charged by service providers both fell but stayed in expansionary territory, with the former still higher than the latter, showing that services companies remained under significant cost pressure.
4) The measure for business activity expectations rebounded slightly but remained at a relatively low level, reflecting that companies' confidence in their future prospects remained subdued.
"The Caixin China Composite Output Index fell further to 50.6 in June from the month before, dragged down by both the manufacturing and services sectors.
1) While the gauge for new orders dropped further it stayed in positive territory. The measure for new export business meanwhile returned to contractionary territory. The weakening of foreign demand was obvious.
2) The employment gauge fell further into contractionary territory, reflecting pressure on the jobs market, which was chiefly due to the reduced capacity of the services sector to absorb labor.
3) While the gauge for input costs inched down, the one for output charges edged up, pointing to easing cost pressure on companies.
4) The measure for future output fell to its lowest level since the survey added this gauge in early 2012, though it stayed in positive territory. This suggests sluggish business confidence.
"Overall, China's economy came under greater pressure in June. The conflict between China and the U.S. impacted business confidence rather heavily. Although its impact on exports hasn't been fully reflected in the short-run, the longerterm situation doesn't look optimistic. Future government policies to stabilize economic growth are likely to focus on new types of infrastructure, consumption and high-quality manufacturing."
