Investing.com -- Growth in China’s services sector sped up in May, a private survey showed on Monday, as the relaxing of anti-COVID measures continued to push up consumer demand and boost employment in the services industry.
The Caixin Services purchasing managers’ index (PMI) rose to 57.1 in May from 56.4 in April, beating expectations for a reading of 55.2. The index grew for a fifth straight month after China relaxed most anti-COVID restrictions at the beginning of 2023.
The country saw a sharp rebound in tourism and other consumer-linked industries over the past few months, with the week-long May Day holiday also helping demand. This boosted employment in the services sector, while also pushing up input costs and also keeping sentiment upbeat.
China’s services sector fared much better than manufacturing amid a post-COVID economic recovery this year, although both sectors were still running below pre-COVID levels as consumers and investors remained wary of more disruptions.
The Chinese government has also supported spending by rolling out a slew of stimulus measures this year, although analysts argue that more support is needed to drive the economy back to pre-pandemic highs.
The Caixin data showed the service sector companies remained optimistic over an economic recovery this year. But overall sentiment softened further from a peak hit in January.
While the country’s GDP grew more than expected in the first quarter, the momentum appears to have slowed in recent months.
Official data had shown a sustained contraction in manufacturing activity through May. Manufacturing is by far the country’s biggest economic driver, with a slowdown in the sector heralding weak economic trends for the country.
Slowing demand for Chinese exports, amid worsening economic conditions across the globe, has also brewed uncertainty over an economic recovery this year.
Focus this week is now on more Chinese economic indicators for May, to gauge the pace of a rebound in the country. Trade data is expected to provide more insight into local demand and appetite for exported goods, while inflation data is set to offer more cues on domestic spending.