China's services sector expanded at its quickest rate in 14 months during July, driven by stronger demand, including a rise in new export orders, according to a private survey released on Tuesday. The S&P Global China General Services PMI climbed to 52.6 in July, up from 50.6 in June, marking the highest level since May last year. A reading above 50 indicates growth. This result differed from China’s official data, which showed services activity slipping slightly to 50.0 in July from 50.1 in June. The S&P PMI is often viewed as a better indicator of trends among smaller, export-reliant businesses, especially in coastal regions, whereas the official PMI focuses on larger firms, including state-owned enterprises.

Meanwhile, the S&P China General Composite PMI, which combines manufacturing and services data, eased to 50.8 in July from 51.3 in June. China’s economy, the world’s second largest, slowed less than anticipated in the second quarter, aided by government stimulus and manufacturers accelerating shipments amidst a US-China trade truce. However, concerns persist for the latter half of the year due to weakening export momentum, falling prices, and subdued consumer confidence, aggravated by a lingering property sector slump.

The S&P Global survey highlighted that new business growth reached a one-year high, supporting overall activity going into the second half. New export orders increased for the first time in three months, helped by stronger tourism and more stable trade conditions. Recently, US and Chinese officials agreed to extend their 90-day tariff truce after holding two days of what both sides described as constructive discussions in Stockholm. The survey also noted that service firms, after cutting jobs in June, added staff in July at the fastest pace since July 2024, spurred by increased workloads and growing optimism. This resulted in a slower build-up of unfinished tasks.

Rising costs for inputs such as raw materials, fuel, and wages kept input price inflation in positive territory, prompting service providers to raise their selling prices for the first time in six months. With business activity and new orders improving, overall confidence among service firms strengthened. From July onwards, Caixin has ceased its sponsorship of the S&P Global China PMI surveys.