The Caixin China services purchasing managers’ index increased to 51.1 from the previous month’s 50.7, as reported by Caixin and S&P Global on Thursday, slightly exceeding expectations. This index has remained above the critical 50 threshold separating growth from contraction for 29 consecutive months.
While employment in the services sector increased, deflationary pressures continued, marking the steepest discounting rate in eight months. Confidence among businesses improved compared to April, but it stayed below the average level, according to the report.
“Supply and demand both grew at a somewhat quicker pace as businesses aimed to attract new clients,” stated Wang Zhe, senior economist at Caixin Insight Group. “Nonetheless, foreign demand suffered due to the global trade conflict, with new export business declining for the first time this year.”
Despite a trade truce with the US, sentiment in the economy remains troubled by the impact of Donald Trump’s tariffs. A late-night tweet from the US president stating that Chinese leader Xi Jinping is “extremely hard to make a deal with” puts any long-lasting agreement in jeopardy.
The pressing question is whether policymakers can sufficiently boost consumption to counterbalance the slowdown in international demand. Caixin’s May survey revealed that China’s manufacturing sector encountered its most significant downturn since September 2022, as tariffs negatively affected smaller exporters.
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