China’s Services PMI Improved: Is the Economy Back on Track?

According to data provided by Markit Economics, the Caixin China Services PMI (purchasing managers’ index) improved in October 2017 from its 21-month low in September. It stood at 51.2 in October 2017 as compared to 50.6 in September 2017. It beat the market estimate of 50.8.

The October PMI was affected by the following factors:

• Production output showed stronger improvement in October 2017 compared to September 2017.
• New business orders and export orders showed modest growth in October 2017.
• Employment in the service sector rose marginally in October 2017.

The improvement in China’s services activity indicates that consumer demand for various services is improving sharply. Improving service activity is also signaling that the economy’s transition phase from a manufacturing hub to consumer-based economy is on track. The business confidence index also improved marginally in October 2017.

The Deutsche X-trackers Harvest CSI 300 China A ETF (ASHR), which tracks the performance of China (YINN) (MCHI), rose 4.8% in October 2017. The iShares China Large Cap (FXI) rose 4.2% in the same month.

In the next part of this series, we’ll analyze Indonesia’s manufacturing PMI in October 2017.