China Services PMI Hits Three-Month High in May as Domestic Demand Strengthens

China’s services sector recorded its strongest expansion in three months during May, driven by improving domestic demand, increased client acquisitions, and a rise in new business activity, according to a closely watched private-sector survey released on Wednesday.

The RatingDog Services Purchasing Managers’ Index (PMI) climbed to 54.4 in May from 52.6 in April, significantly surpassing market expectations of 52.3. The reading remained well above the 50-point threshold that separates economic expansion from contraction, highlighting continued resilience in China’s services industry.

Survey findings showed that new business growth accelerated for the fourth time in the past five months. Companies attributed the improvement to stronger market conditions, business innovation initiatives, and the launch of new projects. Meanwhile, new export orders returned to growth after experiencing slight declines in March and April, indicating a gradual recovery in international demand for Chinese services.

As business activity strengthened, service providers expanded their workforce for the first time in four months. Outstanding business volumes increased at the fastest rate since June 2024, reflecting rising customer demand and growing backlogs across the sector.

Despite the positive momentum, businesses faced increasing cost pressures. Input price inflation accelerated to its highest level since October 2024, fueled by higher fuel and oil prices, rising procurement costs, and increased wage expenses. However, many companies chose to absorb these additional costs rather than pass them on to customers, resulting in average selling prices remaining largely stable.

The survey also revealed broader economic improvement. The composite output index, which combines activity across both the manufacturing and services sectors, rose to 54.0 in May from 53.1 in April. This marked the fastest pace of overall business expansion since February, suggesting that China’s economy continues to gain support from stronger domestic demand and improving business conditions.

Investors and analysts closely monitor PMI data as a key indicator of economic health, making the latest results a positive signal for China’s near-term growth outlook in 2026.