Caixin China General Services PMI (April 2021)

Services activity growth hits four-month high in April

Key findings

• Steeper increase in activity amid strongest upturn in sales for five months

• Quicker rise in employment helps to ease capacity pressures

• Optimism towards the year ahead remains historically sharp

Data were collected 12-22 April 2021

April PMI data signalled a sharp expansion of Chinese service sector business activity, that was supported by the strongest rise in overall new work for five months. In order to meet rising customer demand businesses increased their staff numbers at a faster rate, which helped to alleviate pressure on capacity. Input costs meanwhile rose solidly, which prompted firms to raise their prices charged again.

Although easing from March's recent record, optimism around the 12-month business outlook remained marked, partly driven by expectations that business conditions at home and abroad will continue to recover from the pandemic.

The headline seasonally adjusted Business Activity Index increased from 54.3 in March to 56.3 in April, to indicate a sharp expansion of service sector output. Notably, the upturn was the strongest recorded in 2021 to date and quicker than the series average (54.1).

The faster upturn in business activity was linked to the successful containment of COVID-19 and a further improvement in demand conditions. Total new orders expanded at the fastest rate since last November and sharply overall. The steeper rise in sales was also supported by a renewed upturn in export work. New business from abroad rose solidly overall, after a two-month period of decline.

Firmer demand conditions led companies to raise their staffing levels for the second month running in April. Moreover, the rate of job creation was the fastest recorded for five months and solid.

Increased workforce numbers and efforts to improve efficiency drove a renewed fall in the level of outstanding business. That said, the rate of backlog depletion was only slight.

Average input costs faced by Chinese service providers rose again in April, and at a sharper rate than in March. Anecdotal evidence indicated that increased staff and raw materials costs drove the latest upturn in expenses.

Prices charged by services companies also rose in April, though to a lesser extent than that seen for input costs. A number of businesses mentioned raising their charges to help ease pressure on margins, while others indicated that stronger client demand had enabled them to raise their prices.

Looking ahead, services companies in China were strongly optimistic that business activity would be higher than current levels in 12 months’ time. Furthermore, the level of positive sentiment slipped only slightly from March's eight-year record. Growth forecasts were frequently linked to expectations that customer demand will continue to recover from the pandemic, as well as planned company expansions and new product releases.

Comment

Commenting on the China General Services PMI™ data, Dr. Wang Zhe, Senior Economist at Caixin Insight Group said:

“The Caixin China General Services Business Activity Index rose to 56.3 in April, up from 54.3 the previous month and staying in expansionary territory for 12 months in a row. The reading hit the highest level this year, signalling an accelerated recovery of the services sector.

1. Services supply and demand both expanded at a faster pace than the previous month and continued the upward trend for the 12th consecutive month. Both gauges hit this year’s highest levels. Overseas demand recovered fast despite resurgence of Covid-19 cases in some countries. The measure for new export orders bounced sharply back to positive territory in April.

2. The job market continued improving along with market recovery. Service companies added staff gradually to meet market demand. The gauge for employment has stayed in expansionary territory in eight out of the past nine months, reflecting the continuity of services recovery. Outstanding orders declined slightly as an increased number of staff finished part of orders.

3. Price gauges remained at a high level and inflationary pressure heightened. Input costs increased faster last month than the previous one, maintaining expansion for the 10th month in a row, amid rising raw material prices and demand-driven higher labor costs. Prices set by service providers rose along with costs. Surveyed enterprises said strong market demand provided some room for them to raise prices.

4. Entrepreneurs remained confident. Although the gauge for business expectations slightly declined from the previous month, it stayed significantly above the long-term average. Surveyed service providers were confident about the control of the epidemic and the economic recovery.”

Caixin China General Composite PMI™

Sharper rise in total business activity in April

Composite indices are weighted averages of comparable manufacturing and services indices. Weights reflect the relative size of the manufacturing and service sectors according to official GDP data. The China Composite Output Index is a weighted average of the Manufacturing Output Index and the Services Business Activity Index.

The Composite Output Index rose from 53.1 in March to 54.7 in April, to signal a sharp and accelerated rise in total business activity across China. Notably, the rate of expansion was the strongest recorded in 2021 to date and above the long-run trend. Stronger rates of growth were reported across both manufacturing and services, with the latter noting the steeper rate of increase.

The upturn was supported by the quickest upturn in total new orders for four months, which in turn drove the fastest increase in employment since last November. At the same time, inflationary pressures remained strong, with input cost inflation hitting its highest since January 2017, while prices charges rose solidly.

Although slipping from March's eight-year record, business confidence towards the year-ahead outlook for output remained historically sharp in April.

Comment

Commenting on the China General Composite PMI™ data, Dr. Wang Zhe, Senior Economist at Caixin Insight Group said:

“The Caixin China General Composite PMI came in at 54.7 in April, stronger than 53.1 the previous month and hit the highest level this year. The gauges for total demand, supply, employment and overseas demand were all in expansionary territory. Surveyed enterprises remained confident about the economic outlook in the next 12 months. Both the gauges for input costs and output prices stayed at a high level, indicating high inflationary pressure.

“To sum up, the post-epidemic manufacturing and services recovery accelerated as both supply and demand expanded. Business confidence was high amid strong overseas demand and improved employment. Services recovered faster than manufacturing. Inflation will be a focus in the future. Inflationary pressure was evident as input costs and output prices in manufacturing and services have continued to increase for several months.

“Policymakers have expressed concerns about rising commodity prices on several occasions and urged adjusting raw material markets and easing businesses’ cost pressure. In the coming months, rising raw material prices and imported inflation are expected to limit policy choices and become a major obstacle to the sustained economic recovery.”

Contact

Dr. Wang Zhe

Senior Economist

Caixin Insight Group

+86-10-8590-5019

zhewang@caixin.com

Ma Ling

Senior Director

Brand and Communications

Caixin Insight Group

T: +86-10-8590-5204

lingma@caixin.com

Annabel Fiddes

Associate Director

IHS Markit

T: +44 1491 461 010

annabel.fiddes@ihsmarkit.com

Joanna Vickers

Corporate Communications

IHS Markit

T: +44 207 260 2234

joanna.vickers@ihsmarkit.com

About Caixin

Caixin is an all-in-one media group dedicated to providing financial and business news, data and information. Its multiple platforms cover quality news in both Chinese and English.

Caixin Insight Group is a high-end financial research, data and service platform. It aims to be the builder of China’s financial infrastructure in the new economic era

For more information, please visit www.caixin.com and www.caixinglobal.com.

About IHS Markit

IHS Markit (NYSE: INFO) is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers nextgeneration information, analytics and solutions to customers in business, finance and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions. IHS Markit has more than 50,000 business and government customers, including 80 percent of the Fortune Global 500 and the world’s leading financial institutions.

IHS Markit is a registered trademark of IHS Markit Ltd. and/ or its affiliates. All other company and product names may be trademarks of their respective owners © 2020 IHS Markit Ltd. All rights reserved.

About PMI

Purchasing Managers’ Index™ (PMI™) surveys are now available for over 40 countries and also for key regions including the eurozone. They are the most closely watched business surveys in the world, favoured by central banks, financial markets and

business decision makers for their ability to provide up-to-date, accurate and often unique monthly indicators of economic trends. To learn more go to ihsmarkit.com/products/pmi.html.

If you prefer not to receive news releases from IHS Markit, please email katherine.smith@ihsmarkit.com. To read our privacy policy, click here.

Disclaimer

The intellectual property rights to the data provided herein are owned by or licensed to IHS Markit. Any unauthorised use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without IHS Markit’s prior consent. IHS Markit shall not have any liability, duty or obligation for or relating to the content or information (“data”) contained herein, any errors, inaccuracies, omissions or delays in the data, or for any actions taken in reliance thereon. In no event shall IHS Markit be liable for any special, incidental, or consequential damages, arising out of the use of the data. Purchasing Managers’ Index™ and PMI™ are either registered trade marks of Markit Economics Limited or licensed to Markit Economics Limited. IHS Markit is a registered trademark of IHS Markit Ltd. and/ or its affiliates.

Download the report in PDF