China’s unofficial services PMI rose to 51.4 in August, signalling faster expansion

Overview

This macro update assesses China’s August RatingDog Services PMI. Goldman Sachs highlights a faster pace of service-sector expansion, supported by stronger demand conditions, while noting weaker export orders and rising operating costs.

Core views

The headline RatingDog China Services PMI, formerly the Caixin Services PMI, increased to 51.4 in August from 50.4 in July. Because readings above 50 indicate expansion, the report interprets the increase as faster growth in service-sector activity. The result was stronger than both Goldman Sachs’ 50.6 forecast and the Bloomberg consensus forecast of 50.6. The report also notes that the RatingDog services PMI edged higher while the NBS services PMI was unchanged. Underlying activity indicators were generally firmer. The new-business index rose to 52.1 from 50.9, and the employment sub-index increased to 51.0 from 50.8. Outstanding business edged down slightly to 50.7 from 50.8. Survey respondents attributed the improvement to stronger market demand, improved financial conditions, client acquisition and innovation. In contrast, the new-export-orders sub-index declined to 50.3 from 52.0, indicating that the improvement was not broad-based across external demand. Price indicators pointed to greater cost pressure. The input-prices sub-index rose to 51.4 from 50.6, whereas the output-prices sub-index was unchanged at 50.8. Surveyed companies cited higher labour, materials, diesel and oil expenses, together with increased procurement and equipment-replacement costs, as the main sources of higher input costs. This combination indicates that service providers faced rising costs even as the prices they charged did not accelerate further.

Analysis framework

The report interprets the headline PMI and its component diffusion indices, comparing August with July and with Goldman Sachs and consensus forecasts. It then separates domestic activity, employment, export demand and price components to explain the change in service-sector conditions.

Methodology notes

• Other

  PMI diffusion-index analysis

  The report uses the level and month-to-month movement of the headline and component PMIs to assess whether services activity, demand, employment, exports and prices are expanding or weakening.

Key data

• RatingDog China Services PMI51.4 in AugustUp from 50.4 in July; above Goldman Sachs and Bloomberg consensus forecasts of 50.6.
• New business index52.1 in AugustUp from 50.9 in July.
• Outstanding business index50.7 in AugustDown slightly from 50.8 in July.
• Employment sub-index51.0 in AugustUp from 50.8 in July.
• New export orders sub-index50.3 in AugustDown from 52.0 in July.
• Input prices sub-index51.4 in AugustUp from 50.6 in July.
• Output prices sub-index50.8Unchanged from July.

Impact & implications

The report’s evidence indicates stronger domestic service-sector momentum in August, supported by new business and employment, but with weaker export demand and higher input costs as offsetting features.