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The Caixin Services PMI for November 2024 fell to 51.5, below the forecast of 52.5 and October's 52.0, indicating slower expansion in service activities.

While the index remains above the 50.0 threshold, signaling growth, the decline reflects softer demand and cautious consumer spending amid global uncertainties. The data underscores the need for targeted measures to boost confidence and support the sector's recovery.

China’s central bank maintained its key interest rates in November, keeping monetary policy steady amid a cautious economic recovery:

• 5-Year Loan Prime Rate (LPR) remained unchanged at 3.60%, in line with market expectations.
• 1-Year Loan Prime Rate (LPR) was also held steady at 3.10%, matching both forecasts and the previous month’s figure.

The unchanged rates reflect the People's Bank of China's (PBoC) balanced approach to support economic growth while addressing financial stability concerns. Markets will now turn to upcoming economic indicators for insights into the central bank’s next steps.

China's Consumer Price Index (CPI) continued decelerating, registering 0.3% year-over-year (y/y) in October, down from 0.4% in September. The core CPI, which excludes food and energy, showed minimal growth, edging up to 0.2% y/y from 0.1% y/y in September. While services inflation increased to 0.4% y/y (up from 0.2% in September), consumer goods inflation slowed to 0.2% y/y, compared to 0.5% in September.

Moreover, the Producer Price Index (PPI) dropped by 2.9% in October, a deeper decline than September’s 2.8% decrease, marking the 25th consecutive month of contraction.

China's trade data for October 2024 showed significant positive momentum in exports, with year-over-year (YoY) exports surging 12.7%, far exceeding expectations of 5.0% and a previous 2.4% increase. This strong performance highlights robust external demand despite ongoing global economic uncertainties.

Imports, on the other hand, continued to contract, declining by 2.3% YoY, compared to an anticipated 1.5% decrease and a previous slight growth of 0.3%. This decline in imports suggests weaker domestic demand or adjustments in China's purchasing patterns.

The trade balance for October expanded considerably to $95.72 billion, surpassing forecasts of $73.50 billion and the prior figure of $81.71 billion. In yuan terms, the trade balance reached 679.10 billion CNY, also above the expected 560.00 billion CNY and the previous 582.62 billion CNY.

This data indicates a resilient export sector benefiting from international demand, while the decline in imports could signal potential challenges within China's domestic economy. The larger-than-expected trade surplus is likely to bolster China's economic growth metrics but may raise questions about internal consumption trends.

China's Caixin Services Purchasing Managers' Index (PMI) for October came in at 52.0, up from September's 50.5 and exceeding the expected 50.3. This reading indicates an expansion in the service sector, as any figure above 50 reflects growth. The improvement suggests a strengthening in demand and activity within China’s services industry, providing a positive sign for the broader economy amidst ongoing global economic uncertainties.

In October 2024, China's economic activity showed modest expansion, with the Composite PMI rising slightly to 50.8, up from the prior 50.4. The Manufacturing PMI edged up to 50.1, just surpassing the 49.8 forecast, indicating marginal growth in the manufacturing sector. The Non-Manufacturing PMI came in at 50.2, slightly below the anticipated 50.4, but still in expansion territory. 

These PMI figures reflect a gradual recovery in China’s economic momentum, with manufacturing and services sectors contributing to mild growth.

China's central bank, the People's Bank of China (PBOC), has cut its benchmark Loan Prime Rate (LPR) more than anticipated to stimulate economic growth. The one-year LPR was reduced to 3.10% from 3.35%, surpassing expectations. Additionally, the five-year LPR, which influences mortgage rates, was lowered to 3.60% from 3.85%, while markets had expected a reduction to 3.65%. This marks the PBOC’s latest rate cut since July, aiming to boost lending and support the economy amid ongoing challenges.

In the third quarter of 2024, China's economy expanded at its slowest rate since early 2023, signaling growing concerns over its economic momentum. While retail sales exceeded expectations, offering a glimmer of optimism, the sharpest drop in new home prices since 2015 highlighted continuing challenges in the property sector.

Key economic data include Q3 2024 growth numbers: 

• GDP (YoY): Growth was recorded at 4.6%, in line with expectations but slightly lower than the previous 4.7%.
• GDP (QoQ): The economy expanded by 0.9%, exceeding the forecast of 0.7% but slower than the previous quarter’s 1.0%.
• Fixed Asset Investment (YoY): Increased by 3.4% in September, consistent with the previous reading and above the forecasted 3.3%.
• Industrial Production (YoY): Industrial output grew by 5.4% in September, surpassing the estimated 4.6% and August's 4.5%, reflecting resilient manufacturing activity.
• Chinese Unemployment Rate: The unemployment rate fell to 5.1% in September, below the forecast of 5.3%.

Despite these positive indicators, the year-to-date GDP growth of 4.8% lagged behind the anticipated 5.0%, and the rapid decline in new home prices indicates potential risks ahead for the broader economy.

In September, China’s Consumer Price Index (CPI) remained flat at 0% month-over-month (MoM), falling short of market expectations and the 0.4% increase seen in August. On a year-over-year (YoY) basis, China’s CPI rose by 0.4%, missing the 0.7% estimates and also below the 0.6% annual inflation rate recorded in August.

The Producer Price Index (PPI), which measures factory gate prices, also surprised on the downside. The PPI fell by 2.8% YoY, exceeding the anticipated 2.6% drop and showing a significant deterioration from the 1.8% decline in August.

These weak inflation readings highlight the ongoing deflationary pressures in China’s economy, despite government stimulus measures aimed at boosting demand. The country’s sluggish economic recovery, after the COVID lockdowns, continues to be a challenge, with both consumer and producer prices struggling to gain upward momentum.

China’s official Manufacturing Purchasing Managers' Index (PMI) improved to 49.8 in September, up from 49.1 in August, beating the market consensus estimate of 49.5. However, the non-manufacturing PMI in the National Bureau of Statistics (NBS) report, dropped to 50.0 in September, compared to August’s figure of 50.3, missing the 50.4 estimate.

Additionally, China's Caixin Manufacturing PMI contracted to 49.3 in September, down from 50.4 in August, and fell short of the 50.5 estimate. The Caixin Services PMI also missed the 51.6 estimate, dropping sharply to 50.3 in September from August’s 51.6.

On Thursday, September 25, the People's Bank of China (PBoC) cut the one-year Medium-Term Lending Facility (MLF) rate from 2.30% to 2.0%. The one-year MLF was previously reduced in July 2024, from 2.50%.

During a press conference, PBoC Governor Pan Gongsheng announced that China would lower the reserve requirement ratio (RRR) by 50 basis points (bps). He also stated that the central bank would reduce the 7-day repo rate from 1.7% to 1.5%, and down payments for second homes would be cut from 25% to 15%.

On Tuesday, China's central bank announced its most significant stimulus since the pandemic, aiming to lift the economy out of its deflationary slump and steer it back toward the government's growth target.

The People's Bank of China (PBoC) reduced the reserve requirement ratio (RRR) by 50 basis points (bps), freeing up approximately 1 trillion yuan ($142 billion) for new lending. The RRR could be further reduced by 0.25 to 0.5 percentage points, according to Pan, in a rare forward-looking statement.

Additionally, the PBoC will lower the seven-day reverse repo rate, its new benchmark, by 0.2 percentage points to 1.5%, along with other interest rate cuts.