China’s Caixin Services PMI Unexpectedly Dips to 51.6 in August

China’s Services PMI Dips: Export Gains Fail to Offset Weaker Orders

On Wednesday (September 4), the Chinese economy was under the spotlight. In recent years, the Chinese economy has evolved, with the services sector contributing about 50% to the GDP, giving it substantial weight.

The Caixin Services PMI fell from 52.1 in July to 51.6 in August. According to the August survey,

• New work inflows increased, but at a softer pace than in July.
• Conversely, export business accelerated in August.
• Employment declined despite the rising new orders, with firms attempting to save costs.
• Input prices increased at the most marked pace since June 2023, with staffing costs contributing.
• Output prices declined for the first time in seven months. Additionally, the rate of decline was the most marked since April 2022.
• Business sentiment improved.

After Monday’s better-than-expected China Caixin Manufacturing PMI, the private sector PMIs sent mixed signals midway through Q3 2024.

August Private Sector Survey Takeaways

Caixin Insight Group Senior Economist Dr. Wang Zhe remarked on the August survey, saying,

“Business activity and total new orders grew for the 20th month in a row, although both decelerated compared to July. The gauge for the former recorded its second-lowest level so far this year. The number of foreign tourists visiting China continued to increase, contributing to accelerated growth in external demand, keeping the corresponding gauge in expansionary territory for the 12th consecutive month.”

The Market Reaction to the China Caixin Services PMI

The Hang Seng Index extended its losses following the weaker-than-expected services PMI, dropping from 17,412 to 17,362. On Wednesday, the Hang Seng Index was down 1.60% to 17,369.

Before the PMI numbers, the AUD/USD climbed to a high of $0.67155 before falling to a low of $0.66857.

Furthermore, the AUD/USD reacted to the PMI numbers, falling to a low of $0.67004 before climbing to a high of $0.67061.

On Wednesday, the AUD/USD was down 0.13% to $0.67022.

Looking Ahead

Later in the session on Wednesday, US JOLTs Job Openings will also require consideration. Economists expect job openings to fall from 8.184 million in June to 8.100 million in July. A lower-than-expected figure may retrigger investor bets on a US economic hard landing.

Other US economic indicators include trade data and factory orders. However, the labor market data will have more impact on market risk sentiment given the intensifying scrutiny of the US labor market.