China services growth slows in May - Caixin

Growth in China’s services sector slowed in May, according to a survey released on Thursday.

The Caixin services purchasing managers’ index fell to 55.1 from 56.3 in April, coming in below consensus expectations for a reading of 56.2 but above the 50.0 mark that separates contraction from expansion.

Wang Zhe, senior economist at Caixin Insight Group, said: "Services supply and demand continued their upward trends for the 13th consecutive month, though both expanded at a slower pace than in the previous month.

"Inflationary pressure was enormous as price gauges continued to rise. Both the measures for input costs and the prices service providers charged rose to their highest points of the year."

Freya Beamish, chief Asia economist at Pantheon Macroeconomics, said: "A drop was to be expected, despite the near-stability of the official gauge; metro, online sales, and housing sales figures all indicated a pull-back. We aren’t concerned, though, with the index remaining at strong levels, and re-opening likely to pull the it higher in the next few months. At the same time, the backlogs of work subindex rose above 50 again, to its highest level for over a year.

"Cost and price pressures built, in a reminder that the biggest threat to GDP growth in H2 is that capacity won’t be able to come online quickly enough. The implied pace of increase in both costs and prices was the quickest since last year."