China’s services activity expanded at its fastest pace in three months in May, driven by stronger growth in new business and a significant rebound in overseas demand. This positive momentum, however, was tempered by rising cost pressures faced by firms, according to a private-sector survey released on Wednesday. The RatingDog China General Services Purchasing Managers’ Index (PMI), compiled by S&P Global, increased to 54.4 in May from 52.6 in April. S&P Global is a leading provider of independent credit ratings, benchmarks, and analytics to the global capital and commodity markets. A reading above the 50-mark on the index signifies expansion, while anything below indicates contraction. This latest reading was broadly consistent with an official survey released earlier, which also showed services activity returning to expansion after a contraction in April, though the two surveys cover different samples.
New business witnessed its quickest growth in three months, bolstered by improved demand, business innovation, and successful new client acquisitions. Furthermore, new export business returned to growth following a contraction in April, signalling a healthier international trade environment for service providers. In response to a rise in outstanding business, service providers also increased their workforce for the first time in four months, indicating a positive shift in employment trends within the sector.
Despite the strong performance, input cost inflation accelerated to its highest level since October 2024. This increase was primarily driven by higher oil and fuel prices, augmented by increased procurement costs and rising wages across the sector. Despite these inflationary pressures, business confidence regarding activity over the coming year remained positive, suggesting an optimistic outlook among service sector companies. The Composite Output Index, which blends manufacturing and services, also saw an increase, rising to 54.0 in May from 53.1 in April.
