(May 6): China’s services activity unexpectedly expanded at a stronger pace in April, a private survey showed, even as price shocks from the Iran war ripple through the economy and companies choose not to pass on higher costs to customers.
The RatingDog China services purchasing managers index (PMI) rose to 52.6 from 52.1 in March, according to a statement published on Wednesday, staying well above the mark separating expansion from contraction. The median forecast of economists surveyed by Bloomberg was 52.
While the rate of input cost inflation accelerated to the highest so far in 2026 as a result of rising oil and fuel prices, “service providers continued to reduce their charges slightly to boost competitiveness”, Yao Yu, the founder of RatingDog, said in the statement. “Overall pressure remained modest.”
China is seeing signs of a return of inflation as the Iran war pushes up energy costs for households and businesses. At the same time, authorities are taking steps to curb the impact of higher fuel costs in adjusting the maximum retail prices allowed for gasoline and diesel.
While inflation will stay in check if firms absorb their higher expenses, the risk is that their profit will come under even more pressure. For now, RatingDog’s report found that service providers reported greater inflows of new work, with their 12-month outlook growing more upbeat at the start of the second quarter.
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Although new export business slipped for the second month, its rate of decline eased since March. Domestic markets “remained a key driver” of demand for the sector in April, according to the statement.
The latest results contrast with the official PMI survey, which showed service business activities fell back into contraction in April, mostly as a result of a downturn in sectors such as wholesale and retail trade. Though domestic consumption has remained weak, retail sales for services have generally been growing faster than goods sales.
Retail sales in March fell short of expectations with an increase of 1.7%, down from a 2.8% expansion in the first two months of the year.
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Beijing has repeatedly pledged to rebalance growth away from exports and towards consumption — especially in services sectors such as tourism and entertainment — targeting a part of the economy that holds out the promise of unlocking additional demand.
“The manageable cost environment allowed firms room to maintain price competitiveness,” Yao said. “The sustainability of growth will hinge on the continued resilience of domestic demand.”
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