Why China’s Official Non-Manufacturing PMI Slowed Down in April
China’s non-manufacturing PMI
China’s official non-manufacturing PMI (Purchasing Managers’ Index) is an economic indicator that provides a snapshot of an economy’s non-manufacturing sector performance. It tracks business activities of the service sector and construction industry. A reading above 50 indicates that the activity is expanding. Below 50 signals a contraction. PMI is released every month by the National Bureau of Statistics of China.
China’s non-manufacturing PMI includes ten subindexes:
- business activity index
- new orders index
- new export orders index
- in hand orders index
- stock index
- input price index
- sales price index
- employment index
- supplier delivery time index
- business activities expectation index
The non-manufacturing PMI covers the retail, aviation, software, real estate, and construction sectors.
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Official non-manufacturing PMI
China’s official non-manufacturing PMI weakened in April to 53.5 after a sharp rise to 53.8 in March. This indicates that the service sector is affected by the slowdown in the Chinese economy. Non-manufacturing PMI of the service industry was 52.5, a decrease of 0.7% over the previous month. The growth rate of total business declined while the construction industry increased 59.4, a 1.4% rise over the previous month.
Subindexes of non-manufacturing PMI
The new orders index fell 2.1% from the previous month, to 48.7. This indicates that market demand of the non-manufacturing industry decreased. The input price index rose 0.7% over the previous month to 52.1, indicating that input prices during the process of production and operation of non-manufacturing enterprises continued to rise. The employment index was 49.2, an increase of 1.0% over the previous month, indicating that the pace of labor employment of non-manufacturing enterprises slowed down.
Impact on funds
Non-manufacturing PMI data indicate that the service sector is also feeling the heat of a general slowdown. However, the service sector has emerged as a major growth driver after China’s manufacturing sector was crippled due to overcapacity and sluggish demand.
Chinese funds such as the AllianzGI China Equity A (ALQAX), the Eaton Vance Greater China Growth – Class A (EVCGX), the iShares MSCI China (MCHI), and the SPDR S&P China ETF (GXC) have sizable exposure to the service sector. They would benefit from growth in the non-manufacturing sector.
In the next part of the series, we’ll look at Caixin China General Services PMI data.