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China service sector expansion slows in May; trade tensions weigh on confidence

Chinese service sector activity growth eased in May from the previous month as new orders from abroad increased at a slower rate and trade tensions weighed on business confidence, data from Caixin and IHS Markit showed.

The seasonally adjusted Caixin China General Services Purchasing Managers' Index dropped to a three-month low of 52.7 in May from 54.5 in April. Service providers saw a further increase in sales, partly due to new product launches and promotional activities, but growth in job creation and new business fell, suggesting slowing demand in the sector.

Business expectations, while still positive, fell to the lowest level since July 2018 as service providers cited uncertainty regarding trade tensions between the U.S. and China, as well as subdued global demand, according to the survey.

The Composite Output Index, which covers both manufacturing and services activities, came in at 51.5 in May, down from 52.7 the previous month.