Commerce Development Research Institute (CDRI) announced today on 6th that the "Index of Service Industry, ISI" is representing the "tend to warm" yellow red light and index score of 105 points. Mainly due to the sustained and steady recovery in the global market, coupled with the rising demand for electronic-related products and the preparation for stocking before the holiday, our export momentum in September was strong compared with the same period of last year. The performance of the wholesale trade increased by 6.7% over the same period last year. However, as the summer vacation ended, the turnover of the domestic catering industry and retail trade in September both decreased by 9.1% and 0.4%, respectively, as compared with the previous month. Overall, the performance of the business services industry in September remained as yellow red light.
In October, our commercial service industry benefited from the launch of the new iPhone 8 at the end of September with sales continuing until October. Global consumers are also looking forward to the launch of the iPhone X. The result is reflected in the performance of export and domestic electronics-related retail and wholesale industries. In the domestic market, the rising purchasing power of gifts and festive goods, the continued celebrations of the department store anniversary, and the introduction of new car promotion programs have contributed to the performance of the domestic retail industry. Catering industry is benefit from the holiday even in October, regarding demands of family and friends gathering for dinner. Overall, the sales growth of iPhone 8 in October caused the performance growth of the related supply chain and sales to be still and not as good as expected, slightly affecting the performance of the relevant index scores and maintaining the index score of the overall services index at 105 points.
In November, due to meet Singles’ Day as well as Christmas holiday demands in Europe and the United States in December, in continuation of our wholesale export strength. In respect of the domestic demand market, due to the continued activities of the department store anniversary celebrations and the launch of Singles’ Day in November, the relevant retail sales will be optimistic. However, it is worth noting that the iPhone X already belongs to high-priced goods may be showing commodity crowding-out effect, reducing domestic demand for comprehensive retail or catering tourism. It is noteworthy that the introduction of future infrastructures government plan will gradually bring about the industry-related effects as private investment and consumption gradually increased, together driving the performance of the domestic retail and catering industry. It is estimated that the index score will remain at 105 points.
Global Status in September
The consumer confidence index released by the University of Michigan in September was 95.1, an increase of 3.9% over the same period of last year. Sales of retail sales and catering services (excluding car sales) reached US $ 3,695.2 billion in September, up 4.2% over the same period of last year. Consumer confidence and retail performance continued to grow, indicating that private consumption in the United States continued to expand. The manufacturing and non-manufacturing purchasing managers index were 60.8 and 59.8, is still above the prosperity line. In September, non-farm payrolls (private sector) stood at 12,432.2 thousand, an increase of 175.6 thousand from the same period of last year. The unemployment rate dropped 0.7% down to 4.1% from a year earlier. It further shows that the expansion in consumption led to real output growth. In addition, the inflation rate in September was 2.2%. The economic outlook in the United States is quite optimistic and the chances for the Federal Reserve to tighten policy will be raised in the short term.
The EU announced in September the eurozone consumer sentiment index was -1.2, compared with 7.1% growth over the same period last year, while inflation rose to 1.5%, indicating that the consumption power in the eurozone continued to grow. Eurozone manufacturing and service purchasing managers index were 58.1 and 55.8, respectively, are located above the prosperity line, and by the OECD announced business confidence index was 101.5, an increase of 1.1% over the same period last year, coupled with August overall unemployment rate and youth unemployment rate were 9.1% and 18.9% respectively in the month, down 0.8% and 1.6% respectively from the same period of last year. This shows that the economy of the eurozone continues to improve and at the same time confirms the trend of domestic demand expansion. In September, the economic sentiment indicator(ESI) reached a new high this year with a score of 111.4. On the whole, the European economy has shown some remarkable signs of growth and its outlook is quite optimistic.
In September, Japan's customs export and import values were 591.0 and 569.3 billion, respectively, up 5.5% and 7.2% respectively. With the continuous improvement of trading activities, the performance of manufacturing industry also continued to expand, and the labor market also continued to improve. The manufacturing purchasing managers' index for September was 52.9, above the peak of prosperity line; the unemployment rate came to 2.8% and the number of employed workers increased by 99 thousand as compared with the same period of previous year. Under the improvement of manufacturing growth and employment, consumption has been boosted. In September, the service purchasing managers' index was 51.0 while the consumer confidence index was 43.9, up 1.3% over the same period of last year. The total retail sales came to JPY 11.3 trillion, 2.24% over the same period. However, the consumer price index is still hovering around 101, with inflation rate of 0.7% in September but rising steadily since February 2017, indicating that Japan's economy is continuously recovering.
The import and export growth rates of China in September were 18.7% and 8.1%, respectively, of which the annual increase rate of imports was as high as double-digit. September manufacturing index was 54.7, an increase of 1.4%, manufacturing purchasing managers index was 52.4, indicating manufacturing is still in expansion. In the domestic market, the retail sales of consumer goods in China in September amounted to RMB 30,870 billion, up 10.34% over the same period of last year. The official non-manufacturing purchasing managers' index was 55.4 and the inflation rate was 1.63%, indicating that the demand of domestic market has also grown.
Economic activity in advanced countries began to strengthen. Employment in the eurozone and Japan have all improved, which will help to boost output levels in emerging countries. The United States may have uncertainties about delaying the implementation of tax cuts and may have an impact on consumer expectations. However, private consumer spending will slow but will not decline because of strong consumer and business confidence. The tight monetary policy due to similar expectations with the market, the impact on the US domestic market is not big. The eurozone continued to recover, with the inflation rate also starting to rise. The growth momentum has already surfaced. From the second half of 2017 to the end of 2018, economic activity will start to increase. The demand in growth of the domestic market, driven by global demand expansion with China's import and export performance, due to the appropriate expansionary policy, China will also continue to grow in 2018.
Domestic Situation in September
With the continuous improvement of global economy, our export value in September was 289 billion U.S. dollars, up 28.1% over the same period of last year. In addition, in boosting the performance in growth of our manufacturing industry, it also pushed up the turnover in the wholesale industry and increased the demand in the labor market. The index of manufacturing production in September was 114.1, up 5.4% over the same period of last year; the manufacturing purchasing managers' index was 57.7; the turnover of the wholesale industry came to 8,820 billion, up 6.7%; the non-agricultural employment was 1,080.8 thousand, an increase of 8.9 thousand over the same period of last year; the unemployment rate was 3.77%, down 0.22%. The improvement in the production and employment markets will be helpful for the expansion of the domestic market in demand. In September, the non-manufacturing purchasing managers' index was 53.0%. The turnover of the retail industry reached 3,412 billion, up by 3.2% year-on-year. The turnover of catering industry reached 355 billion, an increase of 0.9%. Overall, the performance of the commercial service industry was not bad. The September ISI indicator score was 105 points.
The positive outlook for the global economy in the second half of 2017 and the first half of 2018 will be conductive to our export performance and the improvement of employment opportunities in our country. Coupled with the current inflationary pressures and inflation expectations, all are in a mild state, contributing to private consumption. The future infrastructures government plan which launched by the government has started its planning and the effect brought by the industrial linkage will gradually surface in the second half of the year, and private investment will gradually grow. The gradual increase in private investment and private consumption is expected to push up the performance of the retail and catering industry in the second half of 2017 and the first half of 2018.
Indicator Score:
ISI indicator source is divided into three major directions, the securities market, salaries and operating conditions. In September 2017:
l Securities Market: The price index on related stocks in business services fell to 413.1 from 413.4, and the value of transactions dropped from 887.9 billion to 618.6 billion. In September, the ISI dropped to 101.
l Salaries: The average man-hour increased from 169.3 hours to 181.4 hours. The recurring average salary increased from 29,388 to 29,468. In September, the index was raised to 106 points.
l Operating Conditions: Except for the increase in turnover of information technology services and professional science and technology services, the remaining indicators all declined. The index score for September 2017 was revised down to 102 points.
October and November ISI Forecast:
New iPhone sales due to consumer expectations, so that sales of iPhone 8 is not as expected, thereby affecting the follow-up related to the growth of the performance of the supply chain, in addition to the number of days due to holiday and shifts at work changes, so that October is less than 3 days than in September, resulting in not effectively promote the performance of our wholesale industry. In the domestic market, the effect of the Mid-Autumn Festival and the Double Tenth holidays, as well as the increasing purchase of gifts and barbecued goods, contributed to the growth of the performance of the retail and discount stores. The starting of the department store's anniversary celebrations continued with the launching of various promotional programs to stimulate consumption boom. In addition, the promotion programs of car manufacturers after the July’s Lunar Year continued to be introduced. In addition, the launch of new smart cars will help promote the performance of the domestic auto retail industry. The catering industry is benefiting with the holiday effect, there is also the need of family and friends gathering for dinner. Overall, the uncertainties in the global market coupled with the recovery in the domestic market kept the ISI in October at 105 points, with “tend to warm” yellow red light.
In November, in preparation for the December Christmas holiday, countries in Europe and the United States expect to see the frenzy of festive goods in November, which will benefit the export-related strength of our wholesale trade. However, it is noteworthy that the effect of the reduction of the balance sheet announced by the Federal Reserve System in US has been partially reflected in the economic data in September. Coupled with the 2.2% inflation rate and relatively low unemployment rate, the process of shrinking the scale was held as scheduled, then follow-up market performance is bound to be affected, thereby affecting our wholesale export kinetic energy. In the domestic market, due to the iPhone 8 buying is not strong, it is estimated that consumers will be diverted to buy iPhone X in November, increased 3C and handheld device-related retail performance. In addition, the selling price of iPhone X hit a new high in Apple-related products, which will not rule out the emergence of crowding-out effects that will reduce the willingness for consumers to purchase products. This will impact on the performance of the general retail and department store industry. In addition, what is worth observing is the future infrastructures government plan, will be driven by a number of major developments, private investment and consumption have been gradually boosted and their effects have gradually emerged in industrial relations. It is expected that the performance of the retail and catering industries will gradually be raised which then performed. Based on the above, a preliminary estimate of the ISI in November maintained a score of 105 with the yellow red light.
