Softer growth but strong performances for smaller firms

The Caixin China Composite Purchasing Managers' Index, which measures performance in smaller manufacturing and services firms, decreased in December but still signaled expansion in total Chinese business activity.

The index fell to 52.6 last month from 53.2 in November, which was a 21-month high.

A number above 50 indicates an expansion in activity, while below that points means contraction.

The reading showed that “China’s overall economy continued to stabilize,” said Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group Ltd, an affiliate of Caixin Global.

The Caixin China General Services Business Activity Index fell to 52.5 in December from 53.5 in November. It indicated softened growth though services businesses continued to expand.

Despite a slower expansion pace of services companies, new orders grew at their fastest pace in three months in December, according to the survey.

The faster growth was driven by new orders gained from a larger client base, new product offerings and improved marketing strategies.

New export order growth, however, weakened in December, reflecting “slowing expansion of foreign demand,” Zhong said.

The measure for employment across the services sector fell to its lowest point in five months despite remaining in positive territory, with a number of companies adopting a relatively cautious approach to hiring to keep costs down and operations efficient.

December data pointed to a further ease in the rate of input price inflation across China. Services firms recorded their slowest increase in operating expenses since March.

The drop in input costs also led to a decline in prices charged by services providers in December, its first contraction since September 2018, falling to its lowest point since August 2017.

Zhong said that suggested “the rise in services demand was possibly due to greater sales promotions.”

The cooling trend in the private survey echoed the official non-manufacturing PMI, published by the National Bureau of Statistics last week, which had fallen from November’s eight-month high.