China Caixin Services and Composite PMIs Increase to 52.7 in March

China Services Sector

On Wednesday, the Chinese economy was in focus again. The influential services sector PMI numbers for March warranted investor attention. In March, the Caixin Services PMI increased from 52.5 to 52.7. Economists forecast a March PMI of 52.7.

According to the March survey,

• Service sector activity increased for the fifteenth month but remained below the long-term average.
• A pickup in new business fueled the expansion of sector activity. New business grew at the most marked pace since December.
• Export business rose at the fastest pace in nine months.
• An improving demand environment supported a more positive outlook, with business confidence rising for the first time in three months.
• However, employment levels fell for the second month.
• Price pressures subsided. Higher raw material, labor, and transport costs pushed input prices higher. However, the rate of inflation declined further below the series average. As a result, selling prices increased at a slower rate.

Following better-than-expected Caixin Manufacturing PMI numbers, the Services PMI raised hopes of a turnaround in the Chinese economy. The Caixin Composite PMI increased from 52.5 to 52.7. Economists forecast a PMI of 52.7.

March Survey Takeaways

Demand improved in March, with private sector firms becoming more optimistic about the next 12 months. However, softer inflationary pressures suggested a weak demand environment by historical standards.

The Aussie Dollar Reaction to the China Caixin Services PMI

Before the PMI numbers, the AUD/USD rose to a high of $0.65218 before falling to a low of $0.65040.

However, in response to the PMI survey, the AUD/USD rose to a high of $0.65118 before declining to a low of $0.65073.

On Wednesday, the AUD/USD was down 0.16% to $0.65074.

Up Next

During the US session, investor interest will focus on US ADP employment change and ISM Services PMI numbers.

Economists expect the ADP to report a 148k increase in employment in March after rising by 140k in February. However, economists forecast the ISM Services PMI to rise from 52.6 to 52.7 in March.

Better-than-expected numbers could further impact investor bets on a June Fed rate hike.

Moreover, investors must track FOMC member commentary throughout the session. Fed Chair Powell is on the calendar to speak. FOMC members Michael Barr, Michelle Bowman, Austan Goolsbee, and Adriana Kugler will also deliver speeches.