Services activity expands in May

BUSINESS activity and new work in the services sector are rising at the quickest rate since late 2010, according to latest Caixin PMI data, signaling the first increase in Chinese services activity for four months in May amid an easing of measures related to COVID-19.

The seasonally adjusted headline Caixin China General Services PMI jumped to 55.0 from 44.4 in April, the first increase in services activity since

January. The rate of expansion was also the steepest recorded since October 2010.

A reading above 50 indicates expansion, a reading below reflects contraction.

Companies said an easing of restrictions related to the pandemic had driven the renewed expansion in activity, according to Caixin.

However, the pandemic continued to have a detrimental impact on new export work, which fell sharply.

The resumption of business operations and an improvement in client demand reportedly led to the first upturn in total new orders since January. The rate of expansion was the sharpest since September 2010 and faster than the historical average.

Data indicated that the increase was largely supported by firmer domestic demand, as new export business continued to fall markedly in May. Firms frequently said external demand was weak amid the ongoing pandemic and subsequent public health measures.

Confidence regarding the year ahead remained strong overall, despite weakening since April.

“Demand for services recovered more strongly than that for manufacturing, which was more constrained by sluggish exports amid the ongoing impact of the pandemic’s spread outside China,” said Wang Zhe, senior economist at Caixin Insight Group.

The Caixin China General Services PMI is compiled by IHS Markit from responses to questionnaires that are sent to a panel of around 400 service sector companies.