BEIJING • China's service sector expansion slowed last month, a private sector survey showed yesterday, with weaker overseas demand and increased costs putting pressure on businesses.

The Caixin/Markit service Purchasing Managers' Index (PMI) fell to 55.1 last month from 56.3 in April, but was still well in expansionary territory. The 50-mark separates growth from contraction on a monthly basis.

The survey attributed part of the slowing expansion to a fall in overseas demand as Covid-19 cases abroad hurt business activity. A gauge of export orders slipped into contraction.

The Caixin PMI contrasts with an official survey released earlier this week that showed activity in the service sector expanding at a faster pace last month.

Though slower to recover from the pandemic than manufacturing, a gradual improvement in consumption has stimulated activity in China's service sector, which includes smaller and private firms.

Growth in new orders slipped and service firms increased their staffing levels for the third straight month, but at a slower pace, the Caixin survey showed.

Inflation pressures worsened, with input costs rising at a sharper rate last month and reports of more expensive raw materials, energy, staff and transport, the survey also found.

Even though firms were able to raise selling prices for the 10th consecutive month, the increases have yet to catch up with the inflation in input costs.

"Services supply and demand continued their upward trends for the 13th consecutive month, though both expanded at a slower pace than in the previous month," said senior economist Wang Zhe, from Caixin Insight Group, in a statement accompanying the data release.

"Inflationary pressure was enormous as price gauges continued to rise. Both the measures for input costs and the prices service providers charged rose to their highest points of the year."

The Caixin China General Composite PMI came in at 53.8 last month, down from 54.7 in April.

REUTERS