BRIC Services PMI: November

Includes: BIK, BKF, EEB, EMDD
by: Constantin Gurdgiev

BRIC Services PMIs are in for November, so let's take a quick look at the headline numbers:

Russian Services PMI came in at 49.8 in November - a whisker away from 50.0 - and up from 47.8 in October. This marked the second consecutive month of sub-50 readings in the series. The 3-month average through November is at 49.6, which is weaker than the 3-month average through August 2015 (50.1), but stronger than the 3-month average through November 2014 (47.5). Per Markit, Services sector business activity declined only fractionally in November, although new business contracted for first time in eight months and outstanding business deteriorated further. "With backlogs of work falling, Russian service providers continued to shed jobs during November. Moreover, job cuts have been recorded in every survey period since March 2014. Panel members mentioned a contraction in employee numbers reflected efforts to cut excess capacity".

Chinese Services PMI weakened in November to 51.2 from 52.0 in October, with the 3-month average through November now at 51.2, down on the 3-month average of 52.4 through August 2015 and on the 53.1 average through November 2014. Given that Chinese Services PMI has never registered a sub-50 reading, the current reading is consistent with statistically zero growth. Per the Markit release, the index is now in a six-month long trend of falling PMI readings. "After a solid expansion in October, total new work placed at Chinese service providers rose only slightly in November. According to panellists, relatively weak market conditions had softened client demand in the latest survey period. Furthermore, September 2015 excepted, the latest increase in new work was the slowest seen in 16 months."

Indian Services PMI posted a significant retrenchment from 53.2 in October to 50.1 in November, effectively signalling zero growth in the sector, and falling to the lowest level in 5 months. The 3-month average through November is at 51.5, well ahead of current-month reading that exactly matches the 3-month average through August 2015. The 3-month average through November 2014 stood at 51.4. Per Markit: "Sub-sector data indicated that output growth in the Financial Intermediation, Post & Telecommunication, Renting & Business Activities and 'Other Services' categories was offset by declines at Transport & Storage and Hotels & Restaurants firms. In fact, the latter recorded a sharper rate of reduction. Indian services companies saw demand growth lose strength during November, leading to the slowest rise in incoming new work since July. Survey members blamed fierce competition and frail economic conditions for the slowdown in growth of new work."

Brazil remains the weakest link in the BRIC group in terms of economic activity, with the country's Services PMI rising to 45.5 in November from 43.0 in October, still signalling sharp contraction in the sector, and marking the ninth consecutive month of sub-50 readings. On a 3-month average basis, the average through November was 43.4, which is an improvement on the average through August 2015 (41.3), but down on the 3-month average through November 2014 (49.3). Per Markit: "Sub-sector data highlighted a broad-based recession, with output, new business and employment falling across all six monitored categories. Leading services activity to decrease was a further drop in incoming new work, the ninth in as many months. Despite being the softest since August, the rate of reduction was sharp. Evidence from survey participants indicated that demand had been suppressed by the country's fragile economic situation."


Overall, therefore, BRIC Services sectors have been performing poorly in November 2015, with no upside to growth from the sector in any of the economies. Brazil is the weakest performer in the group, with Russia being the second weakest. India's growth momentum of July-October 2015 is now exhausted, while China is showing a downward trend in Services sector growth since July 2015.