China’s services activity expanded at the fastest pace in three months in May, helped by stronger growth in new business and a rebound in overseas demand, though rising cost pressures weighed on firms, a private-sector survey showed on Wednesday.
China’s RatingDog Composite PMI rose to 54.0 in May-26 (Apr-26: 53.1), marking the highest reading since Feb-26 and pointing to a stronger expansion in private-sector activity. This was mainly underpinned by a surging services sector and steady manufacturing output.
The services sector marginally increased to 54.4 (Apr-26: 52.6), recording the strongest growth since Feb-26, driven by the fastest surge in new orders in three months. Notably, export orders rebounded after two months of marginal declines, though foreign sales continued to lag behind robust domestic demand.
Labour markets improved as employment expanded for the first time in four months, with job creation outpacing Jan-26’s levels. On the inflation front, input costs rose at their sharpest rate since Oct-24, driven by higher fuel prices and rising wages. In contrast, output price inflation held steady; though cost pressures ticked up, they remained below the survey’s long-run average.
Looking ahead, MBSB in its research note highlights that business sentiment reached a three-month high, fuelled by a robust pipeline of new projects and a brighter economic outlook. While China’s resilient services sector continues to anchor the economy amid an uncertain global environment, a sharp rise in fuel, wage, and procurement costs threatens to erode corporate margins. This cost burden, alongside shaky global trade and uneven domestic demand, poses challenges to Beijing’s efforts to sustain a broader economic growth.
