China Caixin Services PMI Slips to 52.5 in April Despite Higher New Orders

China Services Sector

On Monday (May 6), the Chinese economy was in focus. The services sector contributes over 50% to the Chinese economy, giving it substantial weightage. Upward trends in service sector activity could signal an improving macroeconomic environment and support buyer demand for riskier assets.

The Caixin Services PMI declined from 52.7 to 52.5 in April. Economists forecast the PMI to fall to 52.5.

According to the April survey,

• New export business accelerated in April, with new services sector business growing at the most marked rate since May 2023.
• Firms continued to reduce employment despite the upward trend in new orders, citing the absence of capacity pressures.
• Input and output costs increased in April, though input prices remained below the long-run survey average.
• Business sentiment increased to the highest level since December 2023, over hopes of a better year ahead.

After the hotter-than-expected China Caixin Manufacturing PMI, new orders across the services sector signaled an upbeat start to Q2 2024. The Caixin Composite PMI increased from 52.7 to 52.8. Economists forecast a PMI of 52.5.

April Private Sector Survey Takeaways

The manufacturing and services surveys highlighted an improving demand environment. However, employment levels declined for the third successive month, suggesting a high degree of uncertainty. Nevertheless, upward trends in selling prices at the composite level were positive, supporting signs of an improving macroeconomic environment.

The Aussie Dollar Reaction to the China Caixin Services PMI

Before the PMI numbers, the AUD/USD fell to a low of $0.66019 before climbing to a high of $0.66223.

However, the AUD/USD reacted to the PMI numbers, falling to a low of $0.66123 before rising to a high of $0.66210.

On Monday (May 6), the AUD/USD was up 0.19% to $0.66205.

Up Next

During the US session, FOMC member commentary warrants investor attention. The US Jobs Report and ISM Services PMI fueled investor bets on a September Fed rate hike. FOMC member support for a September Fed rate hike could drive buyer demand for the Aussie dollar and riskier assets.

Fed Vice Chair John Williams and FOMC voting member Thomas Barkin are on the calendar to speak.