The Caixin China’s Services Sector PMI rose to 52.2 in December 2024 from 51.5 in November, exceeding market expectations of 51.7. This reading indicates the fastest expansion in the services sector since May, highlighting a strong rebound in activity. The growth was driven by greater inflows of new business, reflecting the sector’s resilience and adaptability amidst economic challenges.

Domestic Demand Drives Sales

A key factor in the PMI’s rise was robust domestic demand, which offset declines in export business. New export orders fell for the first time since August 2023, reflecting softening foreign interest. However, the strength of local consumption played a pivotal role in supporting overall sales growth.

Employment and Cost Pressures

Employment in the services sector declined for the first time in four months, primarily due to resignations and cost-cutting measures. On the cost front, input price inflation accelerated slightly, ending a three-month easing trend. Rising material and wage costs prompted firms to increase their selling prices for the first time since June, as they sought to manage growing cost pressures.

Read More: China Caixin Manufacturing PMI

Muted Optimism Amid Rising Challenges

Despite the positive PMI reading, business sentiment weakened to its second-lowest level since March 2020. Concerns over heightened competition and a challenging international trade environment weighed on the outlook. While the sector showed signs of recovery, uncertainties surrounding global economic conditions remain a significant hurdle for sustained growth.

This report underscores the mixed dynamics in China’s service sector, balancing domestic strength against external challenges as the year concluded.