CHINA’S services activity picked up in May, a private-sector survey showed yesterday, as a rise in new orders shored up a consumption-led economic recovery in the second quarter.

The Caixin/S&P Global services purchasing managers’ index (PMI) rose to 57.1 in May from 56.4 in April. The 50-point mark separates expansion from contraction in activity.

The reading contrasts with the official PMI released last week that showed a slower pace of expansion in the services sector.

Bruce Pang, chief economist at Jones Lang LaSalle, said the different survey sizes might explain the discrepancy between the Caixin and official PMI readings. The Caixin PMI surveys around 650 private and State-owned services companies while the official PMI surveys 4,300 companies.

The Caixin survey showed service companies reported a rise in new business last month when the first May Day holiday following China’s COVID reopening boosted orders for hotels, restaurants and travel agencies.

Increased workloads led firms to grow headcount for the fourth consecutive month, although the speed of job creation slowed.

Average prices charged by service companies rose by the fastest since February 2022.

The survey also indicated that capacity pressures persisted, as highlighted by sustained growth in outstanding business.

Caixin/S&P’s composite PMI, which includes both manufacturing and services activity, picked up to 55.6 from 53.6 in April, marking the quickest expansion since December 2020.

Even if firms in the services sector remained upbeat with business activity over the next 12 months, the level of optimism eased to the lowest since December 2022 when China lifted anti-virus curbs.

China’s economy rebounded faster than expected in the first quarter but slowed at the beginning of the second quarter as April data broadly undershot forecasts.

“In general, it remains a prominent feature of the Chinese economy that the services sector is stronger than manufacturing,” said Wang Zhe, senior economist at Caixin Insight Group.

“This divergence highlights that economic growth is lacking internal drive and market entities lack sufficient confidence, underscoring the importance of expanding and restoring demand,” he said. (SD-Agencies)