China’s services sector remained in expansion in July, but growth slowed sharply as domestic demand weakened. The RatingDog China General Services PMI fell from 54.1 in June to 50.4, its lowest reading since September 2024, while the Composite PMI declined from 53.6 to 50.8, marking the slowest pace of overall private sector growth in a year. The latest survey suggests economic activity continued to expand, but momentum softened noticeably after a stronger first half.
The moderation was driven primarily by weaker domestic demand. Total new business increased for a 43rd consecutive month, but growth slowed to its weakest pace since March. In contrast, external demand remained comparatively resilient, with new export business staying in expansionary territory for a second straight month despite easing from June’s year-to-date high. Cost pressures also continued to ease, with input price inflation slowing to its weakest since January, while firms raised selling prices only modestly.
Despite softer demand, the survey contained several encouraging signs. Employment increased for a third consecutive month, the longest period of job creation since the second half of 2024, while backlogs of work rose for a ninth straight month, suggesting firms continue to see enough activity to support hiring. However, business confidence weakened to its lowest level since February 2020, highlighting growing caution over the economic outlook. The report points to an economy that is still expanding, but one that is becoming increasingly dependent on resilient exports as domestic demand loses momentum.
Data Summary
| Component | July 2026 | June 2026 | Trend |
|---|---|---|---|
| Services PMI | 50.4 | 54.1 | ▼ Lowest since Sep 2024 |
| Composite PMI | 50.8 | 53.6 | ▼ Slowest growth in one year |
| Business activity | Expanded | Expanded | Growth slowed sharply |
| New business | Expanded | Expanded | Weakest growth since Mar 2026 |
| New export business | 52.0 | Higher | Still in expansion |
| Input costs | Increased | Increased | Inflation eased to lowest since Jan 2026 |
| Selling prices | Increased | Increased | Inflation moderated |
| Employment | Expanded | Expanded | Third consecutive monthly increase |
| Outstanding business | Increased | Increased | Ninth straight monthly rise |
| Business confidence | Positive | Positive | Lowest since Feb 2020 |
Key Takeaways
- China’s Services PMI dropped sharply to 50.4 from 54.1, marking the weakest expansion since September 2024.
- The Composite PMI slowed to 50.8, signalling the weakest pace of private-sector growth in a year as both manufacturing and services lost momentum.
- Domestic demand softened noticeably, with new business expanding at the slowest pace since March, while export demand remained comparatively resilient.
- Cost pressures continued to ease, with input cost inflation slowing to its weakest since January, providing some relief to businesses.
- Employment expanded for a third consecutive month and backlogs of work increased for a ninth straight month, suggesting firms are still seeing sufficient workloads.
- Business confidence weakened to its lowest level since February 2020, highlighting growing caution over China’s economic outlook despite continued expansion.
