China: The Caixin Services Purchasing Managers' Index exceeds expectations, reaching the highest reading in 3 months.

Data released by S&P Global this Tuesday morning showed that the Caixin Services Purchasing Managers' Index (PMI) in China grew more than expected, recording a reading of 52.0 points for October, the highest level since July. This exceeded forecasts that predicted an increase of only 50.5 points, following a previous reading of 50.3 points at the end of September for the Caixin Services PMI in the People's Republic of China.

Additionally, the report highlighted the following points:

• Business activity and new orders grew for the twenty-second consecutive month, with external demand increasing for the fourteenth straight month.
• Production prices remained stable as price increases at some companies were offset by discounts at others.
• Future activity expectations rose by about 3 points, reaching the highest level in five months, with companies showing optimism regarding short-term economic conditions.
• Employment experienced slight growth as new orders prompted companies to increase their workforce, marking two months in positive territory.
• Work backlogs increased slightly for the third consecutive month.
• Input costs rose, albeit at a slower pace, due to rising energy and raw material prices, while production prices remained stable.
• The composite PMI recorded expansion for the twelfth consecutive month at 51.9 points, with the services sector outpacing the manufacturing sector.
• The contraction in the manufacturing workforce impacted overall employment, despite growth in the services sector.
• Prices remained stable with a slight increase in input costs within the services sector.
• Market optimism recovered from record lows in September.
• Following the Politburo's focus on economic challenges in late September, new policies were introduced aimed at stabilizing demand and improving optimism.
• The labor market remains tense, and prices are low. Achieving growth targets for 2024 will depend on sustained increases in consumer demand, with an emphasis on boosting household income.

It is worth noting that the official PMI survey covers large state-owned enterprises, while the Caixin PMI survey includes small and medium-sized enterprises. As a result, the Caixin PMI is considered a more reliable indicator of private sector performance in China.

Another distinction between the two surveys is their methodology; the Caixin PMI survey employs a broader sample of companies in China compared to the official survey.

Finally, a reading above the 50-point mark indicates growth in the Caixin PMI, and hence growth in the services sector, while a reading below this level suggests contraction.