China services growth hits three-month high, private PMI shows

• New business grew at the fastest rate since June, supported by improving demand and companies' client base expansion efforts, while new export orders accelerated
• Employment increased for a fifth consecutive month as firms hired more staff for heavier workloads, though hiring pace slowed to a four-month low
• Output prices declined for the first time in four months with the sharpest drop since April 2022, even as input cost inflation eased from August levels

China Services Growth Accelerates in September, Private PMI Shows

China's services sector expanded at its fastest pace in three months during September, according to a private survey released Wednesday. The RatingDog China General Services PMI rose to 51.6 from 51.4 in August, remaining above the 50-point threshold that indicates expansion.

Key Drivers:

New business orders grew at the quickest rate since June, driven by improving demand and companies' client base expansion efforts. Export orders also accelerated compared to the previous month, providing additional momentum to the sector's growth.

Employment and Costs:

Employment increased for a fifth consecutive month as firms hired more workers to manage heavier workloads, though the hiring pace slowed to a four-month low. Input cost inflation eased from August levels, while output prices declined for the first time in four months—marking the sharpest drop since April 2022.

Business Sentiment:

Companies reported strengthened confidence compared to the previous month, citing expectations of firmer market conditions, expansion plans, and new project wins as reasons for optimism.

Broader Economic Context:

The RatingDog China General Composite PMI, which covers both manufacturing and services, rose to 52.4 from 52.1 in August, indicating overall economic expansion. This services data complements separate reports showing China's factory activity also returned to growth in September, supported by easing weather disruptions and global AI demand.

Market Implications:

The improving services activity suggests China's economic recovery is gaining traction, particularly in the domestic consumption-oriented sector. However, declining output prices amid slowing input costs may indicate persistent deflationary pressures requiring continued policy support.