In September, Caixin China's manufacturing PMI was 50.6, down slightly by 0.4 percentage points, and the PMI of the service sector hit a new low for the year

Focus:

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Caixin China's manufacturing purchasing managers' index (PMI) recorded 50.6 in September, down 0.4 percentage points from August, and was above the boom and bust line for the fourth time in nearly five months, indicating that the manufacturing boom continued to recover.
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In September, the prosperity of the service sector was above the critical point for the ninth consecutive month, but hit a new low for the year.

【Caixin】China's manufacturing boom continued to recover in September, with both supply and demand expanding, but the global economic downturn dragged down the industry's overall growth expectations.

Caixin China's manufacturing purchasing managers' index (PMI) for September 2023, released on October 1, recorded 50.6, down 0.4 percentage points from August, and was above the boom-bust line for the fourth time in nearly five months, indicating that the manufacturing boom continues to recover.

In September, Caixin China's manufacturing PMI was 50.6, down slightly by 0.4 percentage points, and the PMI of the service sector hit a new low for the year

According to the Caixin China Manufacturing PMI sub-index, manufacturing supply and demand expanded simultaneously in September. Previously, the high temperature weather adversely affected some enterprises, production replenished in September, the production index rose in the expansion range, the new orders index fell in the expansion range, and the new export orders index was still below the boom and bust line, but it also rebounded, indicating that the growth of the total number of new orders was mainly driven by the improvement of domestic demand.

After a significant improvement in August, manufacturing employment fell again in September, and was in contraction territory for the sixth time in the past seven months. According to the survey companies, cost reduction and failure to fill vacancies after voluntary resignation of personnel are important reasons for the resumption of employment contraction. The employment situation of consumer goods, investment products and intermediate goods manufacturers has deteriorated, especially investment products.

The rise in production demand led to further expansion of procurement and an increase in raw material inventories. Affected by the bad weather in some areas, the logistics situation deteriorated slightly, which also affected the delivery of some products, resulting in a slight increase in finished product inventory.

Higher prices of raw materials such as industrial metals, chemicals and crude oil rose in September, driving up manufacturing costs, and the manufacturing purchase price index recorded a new high since February this year. Thanks to good market demand, manufacturing companies were able to pass on high costs downstream, manufacturing factory prices ended six consecutive months of decline, and the index stood on the boom and bust line in September.

While the industry is looking forward to a growth outlook for production in the year ahead, the Manufacturing Business Index is at its lowest level since October 2022. Optimism is related to factors such as improved demand expectations, new product development and investment in new equipment; Worries about the outlook are mainly due to weak external demand.

Wang Zhe, a senior economist at Caixin Think Tank, said that the manufacturing boom continued to maintain a slow recovery in September. Supply and demand both expanded, price indices rose, purchases and raw material inventories increased steadily, but weak external demand, pressure on employment, and entrepreneur optimism also fell to a low. In the past few months, policies have been intensively introduced, and the macroeconomy has shown signs of stabilization, but the repair foundation is still not stable, domestic demand is still insufficient, there are still many external uncertainties, and the pressure on the job market is still large. In the next stage, the implementation of various economic stabilization policies in the early stage should be the focus of attention, and key links such as stabilizing employment and increasing income may need to be further strengthened.

In September, Caixin China's services PMI recorded 50.2, hitting a new low for the year

【Caixin】The prosperity of the service industry in September was above the critical point for the ninth consecutive month, but hit a new low for the year. The expansion of supply and demand in the service industry has slowed down significantly, external demand has improved, employment has "weakly improved", and the overall optimism of entrepreneurs is limited.

The Caixin China General Service Industry Business Activity Index (Services PMI) for September 2023 released on October 1 recorded 50.2, down 1.6 percentage points from the previous month, and has been in the expansion range for nine consecutive months, but updated the year's low for two consecutive months.

At the same time, Caixin China's manufacturing PMI for September 2023 recorded 50.6, a slight decrease of 0.4 percentage points from August, and recorded a boom and bust line for the fourth time in nearly five months. The prosperity of the two major industries fell in the expansion range, dragging down the Caixin China composite PMI by 0.8 percentage points to 50.9 in the month, the lowest in the year, indicating that the economy continued to expand but the momentum slowed.

This trend is not consistent with the National Bureau of Statistics PMI. Previously, the manufacturing PMI released by the National Bureau of Statistics recorded 50.2 in September 2023, up 0.5 percentage points from August and rose to the expansion range for the first time since April; the service sector business activity index was 50.9, ending a five-month streak of declines and up 0.4 percentage points from August. The recovery of the two major industries jointly boosted the composite PMI output index in September by 0.7 percentage points to 52.

From the breakdown data, the expansion of supply and demand in the service industry has slowed down significantly. In September, the service sector business activity index and the new orders index were above the boom and bust line for nine consecutive months, but both recorded new lows in the past nine months. The number of overseas tourists increased, overseas orders increased slightly, and the index of new export orders rebounded in September after a slight decline in August. Some companies reported weaker-than-expected overall demand.

In line with the slow expansion of market supply and demand, companies have also slowed the pace of employment expansion. The employment index of the service sector has been above the boom and bust line for eight consecutive months, but recorded a new low since February. In September, production capacity was still expanding, and the backlog continued to rise, but the growth rate was not significant.

In terms of prices, the operating costs of the service sector rose slightly in September, with companies generally saying that it was related to higher labor and fuel costs. In response to the increase in operating costs, enterprises raised sales prices, transmitting some of the increased costs to customers, and the charging price index was slightly higher than the boom and bust line.

Confidence in the service sector weakened further in September, with the service sector business expectations index recording a new low since December 2022, falling slightly for three consecutive months. Some companies are worried that weakening market conditions will affect sales.

Wang Zhe, a senior economist at Caixin Think Tank, said that China's manufacturing and service sectors both fell in the expansion range in September, with the latter slowing more pronouncedly, and the job market was dragged down by manufacturing, and the composite employment index contracted for the first time in four months. In the past few months, the central government's policies aimed at promoting consumption, expanding investment and stabilizing expectations have been intensively introduced, various important economic indicators have shown marginal improvement, and the macroeconomy has shown signs of stabilization, but the foundation for economic recovery is still not stable, domestic demand is still insufficient, there are still many external uncertainties, and the pressure on the job market is still large. In the next stage, the implementation of various economic stabilization policies in the early stage should be the focus of attention, and key links such as stabilizing employment and increasing income may need to be further strengthened. In addition, the relationship between supply and demand in the real estate market has undergone major changes, and the relaxation of relevant regulatory measures has limited effect on the market, and the squeeze on residents' disposable income and related risks are more worthy of attention.