Economic Buzz: China services activity growth accelerates to solid pace in August

China?s service sector expansion accelerated midway through the third quarter, according to latest PMI data. The upturn was supported by a quicker increase in overall new orders and a stronger rise in new export business. The improvement in sales also drove a further accumulation of backlogged work.

Additionally, sentiment among service providers regarding the one-year outlook for business activity remained positive. However, despite the solid rise in new orders, companies trimmed their headcounts in August. Turning to prices, average output charges declined slightly after rising in July. This was amidst a softer increase in input costs and reports of intense market competition.

The headline RatingDog China General Services Business Activity Index rose to 53.0 in August, up from 52.6 in July. Posting above the 50.0 neutral mark, the latest reading indicated another expansion of services activity in China, thereby extending the current period of growth that began in January 2023. Furthermore, the rate of increase was the fastest seen since May 2024 and solid.

The Composite Output Index posted above the 50.0 no-change threshold at 51.9 in August, up from 50.8 in July. This indicated that overall output increased for a third straight month and at the quickest pace since last November.

Growth was broad-based by sector, and led by services. Overall new business growth also accelerated, while total exports declined at the softest pace in five months. Higher new orders contributed to a renewed rise in backlogs, while business confidence hit a five-month high.

Staffing levels fell slightly, however, following a fractional rise in July. Finally, average input prices rose slightly again in August, while output charges continued to fall.

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