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Investing.com-- China’s services sector grew more than expected in May, private purchasing managers index data showed on Thursday, as strong domestic demand helped offset the impact of increased U.S. trade tariffs, which dented export orders.
The Caixin China services PMI rose to 51.1 in May, edging past expectations of 51.0 and improving from the 50.7 seen in the prior month. A reading above 50 indicates expansion in the sector.
Thursday’s reading marked a 29th consecutive month of expansion for the Caixin services PMI, as service sector activity remained underpinned by strong local demand.
The reading was largely in contrast to dismal manufacturing PMIs released over the past week, which showed a protracted decline in Chinese factory activity due to waning overseas demand.
This slowdown was largely tied to steep U.S. trade tariffs on China, which eroded export orders.
But given that the U.S. tariffs only targeted material goods, China’s services sector saw a much smaller decline in overseas orders. This trend, coupled with strong domestic demand, kept the service sector a bright spot in China’s otherwise struggling economy.
Weakness in manufacturing also saw the Caixin China composite PMI fall to 49.6 in May, its weakest level since December 2022. This showed that overall Chinese business activity contracted in May.