China’s Service Sector Expands For First Time In 4 Months

China’s service sector expanded for the first time in four months in May amid an easing of measures implemented to curb the spread of coronavirus, or Covid-19, survey results from IHS Markit showed Wednesday.

The services Purchasing Managers’ Index advanced to 55.0 in May from 44.4 in April. A score above 50 indicates expansion.

The score moved above 50 for the first time since January, signaling a recovery in the sector. Moreover, the pace of expansion was the steepest since October 2010.

The survey showed that the resumption of business operations and an improvement in client demand reportedly led to the first upturn in total new orders since January. However, growth was driven by domestic demand, while export business logged a marked decline.

Despite an improvement in sales, firms reported another fall in outstanding business. Companies reduced their staffing but the rate of job shedding was the slowest for four months.

On the price front, data revealed that input prices were broadly unchanged for the second consecutive month. Prices charged by services companies continued to fall amid efforts to stimulate sales.

Business confidence across the service sector remained strong in May, despite softening since the previous month.

The private sector also rebounded in May driven by the upturn in both manufacturing and services activity. The composite output index improved to 54.5 in May from 47.6 in April.

“In general, the improvement in supply and demand was still not able to fully offset the fallout from the pandemic, and more time is needed for the economy to get back to normal, Wang Zhe, senior economist at Caixin Insight Group said.

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