China services PMI beats expectations, rising to 51.4 in August

China's services sector expanded at a faster pace in August than markets had anticipated, offering a rare bright spot in an economy still grappling with uneven growth. The RatingDog China General Services PMI rose to 51.4 from 50.4 in July, comfortably above the market consensus of 50.6, according to the private-sector survey released on Thursday.indexbox+1

Domestic Demand Drives Rebound

The improvement was led by an acceleration in new orders after they had touched a four-month low in July, with domestic demand providing the main engine of growth, Reuters reported. Employment in the services sector increased for a fourth consecutive month, the longest streak of job gains since 2023. Overseas new business also expanded, though at a more moderate pace.reuters+1

Input costs continued to climb for the 18th straight month, with firms citing higher wages, raw materials, energy, and equipment expenses. Business confidence for the next twelve months improved relative to July, supported by plans to broaden operations and launch new initiatives.indexbox

Mixed Signals Across the Economy

The services reading diverged from the official NBS Non-Manufacturing PMI, which held steady at 49.0 in August, remaining in contraction territory. Analysts attributed the gap to differences in scope and sampling between the two surveys.fxstreet+1

On the manufacturing side, the official NBS Manufacturing PMI edged up to 49.8 in August from 49.2 in July, beating expectations of 49.7 but staying below the 50-point expansion threshold for a second consecutive month, according to CNBC. The RatingDog China General Composite PMI, which covers both manufacturing and services, rose to 52.1 from 50.8 in July.cnbc+1

Currency Markets React

The stronger data provided a lift to currencies closely linked to Chinese demand. NZD/USD snapped a four-day losing streak, recovering to near 0.5860 during the Asian session on Thursday. Traders now turn their attention to U.S. jobs data due on Friday, with markets also weighing a 62.3% probability of a Federal Reserve rate hike in September following hawkish remarks from Fed Chair Kevin Warsh at the Jackson Hole symposium.fxstreet