BEIJING, May 7 (Reuters) - China’s services sector expanded at the sharpest pace in four months in April, driven by fast growing new businesses, a private survey showed on Friday, although surging costs are likely to weigh on growth over the coming months.
The Caixin/Markit services Purchasing Managers’ Index (PMI) rose to 56.3, the highest since December when the same reading was registered and up from 54.3 in March. The 50-mark separates growth from contraction on a monthly basis.
In contrast to the official survey out last week, which showed expansion in the sector slowed in April, the Caixin survey attributed the faster upturn in business activity to the successful containment of COVID-19 outbreaks in the country earlier in the year, and a further improvement in demand as overseas business grew for the first time in three months.
Total new orders, as a result, expanded at the fastest clip since November, which led services firms to increase their staffing levels for the second straight month.
However, inflationary pressures worsened. Input costs rose at a sharper rate in April, driven by higher labour costs and raw material prices, the survey found.
Even as firms were able to raise selling prices for the ninth straight month, the increases have yet to catch up with the inflation in input costs.
“Inflation will be a focus in the future. Inflationary pressure was evident as input costs and output prices in manufacturing and services have continued to increase for several months,” said Wang Zhe, senior economist at Caixin Insight Group, in a statement accompanying the data release.
“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.”
The Caixin China General Composite PMI came in at 54.7 in April, stronger than 53.1 the previous month and hit the highest level this year. (Reporting by Stella Qiu and Ryan Woo; Editing by Sam Holmes)
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