On Monday, a private-sector survey revealed that China’s services activity increased in May as new orders supported a consumption-led economic recovery in the second quarter.
May’s Caixin/S&P Global services PMI rose to 57.1 from 56.4 in April. Activity expands or declines at 50.
The official PMI showed slower services sector growth last week.
Some economists predict that slower income growth and rising unemployment may reduce pent-up demand for in-person services, causing policymakers to struggle with weak overseas demand and an uneven post-COVID rebound.
Last month’s first May Day holiday after China’s COVID reopening boosted hotel, restaurant, and travel agency orders, according to the Caixin poll.
Although job creation slowed, employers increased staff for the fourth month due to increased workloads.
Service company costs have grown the most since February 2022.
As the excellent business grew, the study showed capacity concerns persisted.
Caixin/S&P’s composite PMI, which includes manufacturing and services, rose to 55.6 from 53.6 in April, the fastest increase since December 2020.
Even the services firms were optimistic about commercial activity over the next year; optimism fell to its lowest level since December 2022, when Beijing loosened anti-virus regulations.
China’s economy improved quicker than expected in the first quarter but lost pace in April as statistics widely undershot predictions.
On declining demand, factory activity in May fell quicker than predicted, worsening the imbalanced economic recovery.
Wang Zhe, senior economist at Caixin Insight Group, said, “In general, the Chinese economy is stronger in services than manufacturing.”
“This divergence highlights that economic growth is lacking internal drive and market entities lack sufficient confidence, underscoring the importance of expanding and restoring demand,” he said.
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