China Services Activity Reaches Three-Month High in May as Demand Strengthens
China’s services sector recorded its strongest growth in three months during May, supported by improving domestic demand and an increase in new client acquisitions, according to a private-sector survey released on Wednesday.
The latest data highlights growing momentum in the country’s services industry despite ongoing economic challenges and rising cost pressures.
Services PMI Beats Expectations
The RatingDog Services PMI climbed to 54.4 in May from 52.6 in April, surpassing market forecasts of 52.3.
A reading above 50 indicates expansion in business activity, and May’s result marked the fastest pace of growth since February, signaling continued resilience in China’s service economy.
New Business Growth Accelerates
Survey data showed that new business activity expanded at a stronger pace, marking the fourth acceleration in the past five months.
Companies attributed the improvement to better market conditions, increased business innovation, and the launch of new projects. Meanwhile, new export orders returned to growth after experiencing slight contractions in both March and April.
The rebound in external demand provided additional support to the sector’s overall performance.
Employment Rises as Backlogs Increase
Service providers increased hiring for the first time in four months as demand continued to strengthen.
Outstanding business volumes rose at their fastest pace since June 2024, reflecting growing workloads and rising order backlogs. The increase in staffing levels suggests that businesses remain confident about future activity and demand conditions.
Cost Pressures Continue to Build
Despite stronger growth, service companies faced higher operating costs during May.
Input price inflation accelerated to its highest level since October 2024, driven primarily by rising fuel and oil prices, higher procurement expenses, and increased wage costs.
However, businesses largely chose not to pass these additional costs on to customers. As a result, average selling prices remained broadly stable throughout the month.
Composite Business Growth Hits Fastest Pace Since February
China’s composite output index, which measures combined activity across both the manufacturing and services sectors, rose to 54.0 in May from 53.1 in April.
The increase represents the strongest pace of overall business expansion since February and points to improving economic momentum across key sectors of the Chinese economy.
The latest survey suggests that stronger demand, rising new orders, and improving business confidence continue to support growth, although elevated cost pressures remain a challenge for companies moving forward.
