Caixin China Services PMI Falls to Second Lowest in Decade

  • Private survey-based report contrasts with official data
  • Composite manufacturing and services index falls below 50

A private Chinese services gauge slumped to the second-lowest reading since the series began a decade ago and close to a level signaling contraction, suggesting conditions may be weaker than the government’s official index indicates.

The Caixin Media and Markit Economics survey of services-purchasing managers fell to a 17-month low of 50.2 in December, down from 51.2 a month earlier, according to the report released Wednesday. China said Friday that its official non-manufacturing PMI rose to 54.4, the highest level since August 2014. A reading below 50 indicates deterioration.

The private data indicate the Chinese economy’s slowdown may be spreading to services, undercutting what has become the nation’s main growth driver. Even so, it also showed job creation in services quickened in December along with company expansion plans.

"In light of the setback to services sector growth, the government needs to gradually relax restrictions in the sector," He Fan, Beijing-based chief economist at Caixin Insight Group, the media group’s think tank division, wrote in a statement. "This will release the potential of supply-side reform, improve the economic structure and help with the industrial transformation and upgrading.”

The reading for the China services business activity index was the second-lowest since the data begin in November 2005. The lowest was 50 in July 2014, Caixin’s report said.

Caixin’s China Composite PMI, which covers both manufacturing and services, dropped to 49.4 in December from 50.5 the previous month.

“This sentiment gauge clearly clouds the growth outlook for China,” Zhou Hao, an economist at Commerzbank AG in Singapore, wrote in a note, citing the composite data.

Caixin’s gauge of employment in services industries increased to 51.3 from 50.8 in November, continuing the rebound from last year’s low of 50.1 in August.

"Services have felt the heat from the economic slowdown," said Iris Pang, greater China economist at Natixis SA in Hong Kong. "Spending in the Chinese New Year may lead to a rebound" in the Caixin gauge, she said.

— With assistance by Kevin Hamlin

Before it's here, it's on the Bloomberg Terminal.