China’s service sector growth moderated in May as activity and new order growth softened since April, survey results from IHS Markit showed on Thursday.

The Caixin services Purchasing Managers’ Index dropped to 55.1 in May from a four-month high of 56.3 in April. Nonetheless, the score remained firmly above the neutral 50.0 level to suggest a marked growth in activity.

Business activity as well as new orders rose sharply in May, despite rates of expansion softening since April. Customer demand continued to expand due to the successful containment of COVID-19 in China, while there were also reports of new product offerings boosting sales.

Employment across China’s service sector rose for the third consecutive month, with a number of firms adding to their payrolls due to rising sales.

Cost pressures at service providers build further in May amid reports of higher prices for raw materials, energy, staff and transport. Consequently, prices charged by services companies increased again in May with the rate of inflation the quickest recorded in 2021 to date and solid.

The 12-month outlook for services activity remained strongly positive but the overall degree of positive sentiment dipped to a four-month low.

Further, the composite output index fell to 53.8 in May from 54.7 in April, to signal a softer expansion of overall Chinese business activity. Growth in both services and manufacturing sectors moderated in May.

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