In February, Caixin'S Service Industry PMI Fell To 51.5, And The Employment Index Fell Into The Contraction Range Again

Affected by the repeated outbreaks at home and abroad, the marginal kinetic energy of service industry repair is further weakened. Caixin's China general service industry operating activity index (PMI) in February 2021, released on March 3, recorded 51.5, continuing the downward trend of the previous two months and reaching the lowest value since May 2020.

Previously released Caixin China's Manufacturing Purchasing Managers Index (PMI) fell 0.6 percentage points to 50.9, the lowest since June 2020. PMI of manufacturing and service industries both declined, which dragged Caixin China's comprehensive PMI to 51.7, 0.5 percentage points lower than last month, indicating that China's overall production and operation activities grew moderately, but the growth rate slowed to the lowest since May 2020.

The trend of service industry and comprehensive PMI is consistent with that of the Bureau of statistics. In February 2021, the business activity index of service industry published by the National Bureau of statistics dropped 0.3 percentage points to 50.8, and the comprehensive PMI dropped 1.2 percentage points to 51.6.

The supply and demand of service industry kept expanding for ten consecutive months, but the growth rate in February continued to slow down. As the domestic and international epidemic situation continues to suppress the city's atmosphere, the service industry business activity index and new order index recorded a new low in the past ten months in February. Foreign demand also began to weigh on aggregate demand, with the index of new export orders in the service sector below the boom and bust line for the first time in four months.

The weakening of market prosperity is transmitted to the employment market. In order to reduce costs, enterprises have reduced the scale of employees. In February, the employment index of service industry ended the expansion trend for six consecutive months and returned to the contraction range. Due to weak demand, the backlog is still reduced.

Service industry input prices continue to be high and inflation pressure is increasing. In February, the input price index of service industry decreased slightly, but it was still significantly higher than the boom and bust line, which was the highest since 2012. The rise of raw material price and the increase of labor cost are the driving factors. Due to the weakening of market demand, service enterprises have limited space to raise prices at the sales end. Although the charging prices have increased, they are relatively stable.

Service industry entrepreneurs are optimistic about the overall economic recovery, especially have sufficient confidence in the favorable situation of domestic and foreign epidemic situation. The service industry business expectation index in February has increased compared with the previous month.

Wang Zhe, a senior economist at Caixin think tank, said that in February 2021, the recovery momentum of manufacturing and service industries continued to weaken, the growth rate of supply and demand slowed down, foreign demand was weak, and employment and inflation pressures continued to increase. Nevertheless, the manufacturing and service enterprises are still optimistic about the future. The market confidence mainly comes from the accumulated experience of epidemic prevention and control in the past year, especially the factors that the unfavorable autumn and winter season is coming to an end. In addition, enterprises are also confident in the prospect of new products coming into the market in the future. At present, it seems that the main challenge facing the policy is to take good care of the economic recovery situation in the post epidemic era and give sufficient attention to inflation.