China’s services activity growth slows in May – Caixin PMI

FILE PHOTO: Employees wearing masks work at a factory of the component maker SMC during a government organised tour of its facility following the outbreak of the coronavirus disease (COVID-19), in Beijing

BEIJING (Reuters) – China’s services sector expansion slowed in May, a private sector survey showed on Thursday, with weaker overseas demand and increased costs putting pressure on businesses.

The Caixin/Markit services Purchasing Managers’ Index (PMI) fell to 55.1 in May, down from 56.3 in April but still well in expansionary territory. The 50-mark separates growth from contraction on a monthly basis.

The survey attributed part of the slowing expansion to a fall in overseas demand as COVID cases abroad hurt business activity. A gauge of export orders slipped into contraction.

The Caixin PMI contrasts with an official survey released earlier this week, which showed activity in China’s services sector expanded at a faster pace in May.

Though slower to recover from the epidemic than manufacturing, a gradual improvement in consumption has stimulated activity in China’s services sector, which includes many smaller and private companies.

Growth in total new orders slipped and services firms increased their staffing levels for the third straight month, but at a slower pace, the Caixin survey showed.

Inflation pressures worsened with input costs rising at a sharper rate in May and reports of more expensive raw materials, energy, staff and transport, the survey found.

Even though firms were able to raise selling prices for the 10th straight month, the increases have yet to catch up with the inflation in input costs.

“Services supply and demand continued their upward trends for the 13th consecutive month, though both expanded at a slower pace than in the previous month,” said Wang Zhe, senior economist at Caixin Insight Group, in a statement accompanying the data release.

“Inflationary pressure was enormous as price gauges continued to rise. Both the measures for input costs and the prices service providers charged rose to their highest points of the year.”

The Caixin China General Composite PMI came in at 53.8 in May, weaker than 54.7 the previous month.

(Reporting by Gabriel Crossley; Editing by Sam Holmes)