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China’s services sector sees fastest expansion in 5 months, survey shows

China’s services sector sees fastest expansion in 5 months, survey shows
Activity in the Chinese services sector is recovering from the pandemic faster than manufacturing, and rose at the fastest rate in five months during April, according to the results of a Caixin/Markit survey.

The Caixin China services PMI, officially known as the Caixin China General Services Business Activity Index, stood at 56.3 in April, against a 54.3 reading in the previous month. Any reading above 50 reflects growth, while a number below that threshold points to a contraction. According to Caixin, the services sector has been constantly growing for 12 straight months.

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The results of the private survey, which reflects sentiment among smaller, private firms, are better than the official Chinese non-manufacturing PMI, released last week. The data, published by the National Bureau of Statistics (NBS), signaled that expansion in both services and manufacturing lost some steam in April.

The Caixin survey showed last week that manufacturing PMI rose to 51.9 in April from 50.6 in March. According to new data, the Caixin China General Composite PMI, which covers activity in both manufacturing and services, was up to 54.7 from 53.1 in March. The growth was driven by strong overseas demand and improved employment, according to Wang Zhe, senior economist at Caixin Insight Group.

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However, the rapid recovery of the sector could be still affected by rising input costs. According to the poll, costs for service providers have been increasing for 10 months in a row and jumped at a faster rate in April compared to a month earlier, due to rising raw material prices and demand-driven higher labor costs. Those extra costs were passed on to the consumer, as the companies had to raise prices to offset the inflation.

“In the coming months, rising raw material prices and imported inflation are expected to limit policy choices and become a major obstacle to the sustained economic recovery,” Wang warned.

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