China's Caixin (財新) reported that the Purchasing Managers' Index (PMI) for the service sector overcame a sharp drop last month and successfully rebounded slightly. Caixin analyzed that, despite the impact of U.S. tariff policies, consumption in travel and the restaurant industry became active due to the May holiday effects.
Caixin stated on the 5th that the service sector PMI for May rose by 0.4 points compared to the previous month, reaching 51.1. A PMI index below 50 indicates economic contraction, while above 50 indicates economic expansion. The PMI announced last month for April was 50.7, marking the lowest since September of last year.
The service sector PMI officially tallied by the Chinese government was recorded at 50.2 for May. This is a rise of 0.1 points compared to the previous month, aligning with the trend of the Caixin index. The official PMI better reflects larger and medium-sized corporations, while the Caixin PMI provides a clearer picture of small and medium-sized enterprises.
Looking at the detailed items of the service sector PMI index for May, the supply-demand growth rate and the new orders index increased, while the new export orders index fell below 50. Caixin analyzed that this was due to the stimulation of domestic demand, which included the Labor Day and Dragon Boat Festival holidays in May.
As service demand recovered, some corporations expanded employment, and the employment index for May reached its highest level in six months. However, while procurement and labor costs continue to rise, corporations are lowering sales prices competitively to attract customers, leading to a deterioration in corporate profit margins.
According to Reuters, the growth trend in the service sector for May saw an overall upward movement, but it could not offset the decline in manufacturing production. The comprehensive PMI for China calculated by Caixin fell from 51.1 in April to 49.6 in May, marking the first entry into a contraction phase since December 2022.
Wang Zhe (王喆), senior economist at the Caixin think tank, noted, "There are still many unfavorable factors for economic development, the uncertainty of the foreign trade environment is increasing, and internally there are also difficulties and challenges."