China's services sector grows in May at fastest pace in three months

(Sharecast News) - Activity in China's services sector grew in May at the fastest pace in three months, according to a survey released on Wednesday. The RatingDog China general services purchasing managers' index, compiled by S&P Global, rose to 54.4 from 52.6 in April. A reading above 50.0 indicates expansion, while a reading below signals contraction.

The composite output index ticked up to 54.0 in May from 53.1 the month before, signalling the fastest growth in overall output since February. RatingDog said the rate of expansion was the second-fastest in two years.

RatingDog founder Yao Yu said: "On a sub-index basis, the expansion momentum continued to strengthen. Total new business increased for the forty-first consecutive month, with the rate of growth quickening to a three-month high, supported by improved domestic demand, business innovation and new client acquisitions. New export business returned to expansionary territory in May following marginal contractions in March and April. The labour market saw a notable positive shift, with employment rising for the first time in four months as firms responded to sustained increases in outstanding business by adding to their workforces.

"Regarding prices, input costs rose for the fifteenth consecutive month, with the rate of inflation accelerating to the highest since October 2024. Firms linked higher costs to oil and fuel prices, increased procurement and higher wages. However, overall cost pressures remained below the long-run survey trend. Faced with rising input costs, service providers largely absorbed the burden, keeping average charges broadly stable in May.

"Business sentiment regarding the 12-month outlook for activity remained optimistic, with the degree of confidence exceeding the rolling 12-month average. Optimism was linked to improved market conditions, new projects and a brighter economic outlook."

Yu said that overall, the services sector saw a further acceleration in expansion in May, underpinned by broad-based growth in new business and employment, along with robust business confidence.

"The manageable cost environment provided leeway for firms to maintain stable pricing strategies," he added.