China Private Sector Logs Moderate Growth

China's private sector expanded at a moderate pace in May as services activity growth improved amid a contraction in the manufacturing sector, survey data from IHS Markit showed Monday.

The Caixin composite Purchasing Managers' Index rose slightly to 51.5 in May from April's 10-month low of 51.2.

A score above 50 indicates expansion. Nonetheless, the score was the second-lowest reading seen since September 2016.

The services PMI climbed to 52.8 in May from 51.5 in April. It marked the first uptick this year and was the highest reading in four months.

While goods producers reported the slowest increase in output for 11 months, services activity expanded at a solid pace that was the quickest since January.

Data showed that the increase in services new orders was the most marked in the year-to-date. On the other hand, manufacturers registered the weakest new order growth in the 11-month sequence of expansion.

In service sector, the rate of job creation eased to the weakest in the current nine-month sequence of growth. Meanwhile, manufacturing firms continued to pare back staff numbers, with the latest reduction the quickest since last September.

As a result, composite employment fell for the second month in a row in May.

Cost pressures intensified at services companies in May. In contrast, manufacturing companies recorded the first fall in cost burdens since June 2016.

Consequently, input prices at the composite level rose at a moderate pace that was the weakest in 11 months.

Service providers raised their selling prices, while manufacturers cut their prices. Output charges were broadly unchanged, which ended a 14-month sequence of inflation.

"The improvement in the services sector bolstered the Chinese economy in May," Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, said.

"However, the rapid deterioration in the manufacturing industry is worrying. We need to closely monitor whether the diverging trends in manufacturing and services will widen further," Zhengsheng added.