The S&P Global PMI composite index for China fell to 49.6 in May from 51.1 in April, indicating contraction in the aggregate Chinese economy for the first time since December 2022. The business activity index for China's services sector, also published today, rose to 51.1 from 50.7 in April, but the headline index for the manufacturing PMI survey, published earlier in the week, showed renewed contraction in the sector. Official PMI survey data also showed weak conditions in both the manufacturing and the non-manufacturing sector in May.

Respondents to today's service sector survey reported improved growth in output and new orders in May, though new export orders were reported to have fallen for the first time this year. The survey showed a small increase in payrolls after two consecutive reductions and its measure of confidence also rebounded from a sharp drop in April, perhaps indicating optimism that global trade tensions will ease. Respondents also reported a stronger increase in input costs but a fourth consecutive reduction in selling prices.

Today's data were in line with the consensus forecast of 51.1 for the survey's services index. The China RPI was unchanged at minus 29 while the RPI-P rose from minus 40 to minus 33, indicating that recent Chinese data in sum are still coming in below consensus forecasts.

The services index is seen pretty stable at 51.1 versus 50.7 in April.

The S&P China Services PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 400 private service sector companies. The panel has been carefully selected to accurately replicate the true structure of the services economy.

The S&P China Composite PMI is a weighted average of the Manufacturing Output Index and the Services Business Activity Index, and is based on original survey data collected from a representative panel of over 800 companies based in the Chinese manufacturing and service sectors.

The PMIs have developed an outstanding reputation for providing the most up-to-date possible indication of what is really happening in the private sector economy by tracking variables such as sales, employment, inventories and prices. The indexes are widely used by businesses, governments and economic analysts in financial institutions to help better understand business conditions and guide corporate and investment strategy. In particular, central banks in many countries use the data to help make interest rate decisions. PMI surveys are the first indicators of economic conditions published each month and are therefore available well ahead of comparable data produced by government bodies.