Decline from Previous Month... Falls Short of Bloomberg Forecast
Business Sentiment Weakens Amid Unstable Trade Truce
Consumer Recovery Remains Limited
The "June Caixin Services Purchasing Managers' Index (PMI)," which reflects the state of China's service sector, fell to its lowest level in nine months.
According to Bloomberg and Reuters on July 3, the June Caixin Services PMI was recorded at 50.6. This is lower than the previous month's figure of 51.1 and also falls short of the market forecast of 50.9 provided by Bloomberg. The PMI uses 50 as the baseline, with readings above 50 indicating expansion and below 50 indicating contraction. The Caixin PMI is considered a particularly useful indicator for tracking the business conditions of export-oriented and smaller companies.
Although the June index remains in expansion territory, it marked the lowest level since September of last year (50.3), making it a nine-month low. Reuters explained that "the main factors behind this are weakening demand and a decline in new export orders, amid an unstable trade truce with the United States."
There is also analysis that a slowdown in China's job market and wage growth is dampening consumer sentiment. Bloomberg pointed out, "While the tariff truce with the United States has contributed to some recovery in trade volume and factory operating rates, the rebound in consumer spending remains limited."
In fact, the official services PMI released by the National Bureau of Statistics of China also edged down last month. The National Bureau of Statistics stated, "The temporary boost to consumption from the May Labor Day holiday is fading."
Meanwhile, the Caixin Composite PMI, which covers both manufacturing and services, rose by 1.7 points to 51.3 in June, up from 49.6 the previous month, returning to expansion territory. The June Caixin Manufacturing PMI also improved to 50.4 from 48.3 in the previous month.
As signs of recovery emerge in the manufacturing and construction sectors, some analysts believe that the Chinese government is unlikely to introduce additional stimulus measures in the short term. The People's Bank of China recently expressed an optimistic outlook for the economy at a meeting, leading some experts to predict that China's second-quarter economic growth rate will reach around the official target of 5%.
Wang Zhe, a Caixin economist, commented, "Recent major macroeconomic indicators are showing divergent trends across different sectors," and diagnosed, "The external environment remains complex and uncertainty is increasing, while the issue of insufficient domestic demand has yet to be structurally resolved."
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