(Yicai Global) June 6 -- Activity in China’s services sector declined for a third straight month in May, but rose from a 26-month low recorded in April, according to the findings of a widely watched private survey.

The Caixin purchasing managers’ index for services stood at 41.4 last month, up from 36.2 in April, data released by financial media group Caixin showed today. A figure below 50 indicates contraction. May’s reading was the second-sharpest decline since February 2020.

“Both supply and demand in the services sector shrank further,” said Dr. Wang Zhe, senior economist at Caixin Insight Group. “The services PMI and the gauge for total new business in May both rose from April’s recent lows, but the May readings were still well below 50. That shows local Covid outbreaks were still hurting the services sector.”

The damage from the latest outbreaks may surpass those of 2020, Wang said, noting that policymakers need to pay closer attention to employment and logistics, remove obstacles in supply chains, and promote the resumption of work and production.

But business confidence rose to the highest in nearly three months in May, though it remained below the long-term average, according to the data.

“Businesses were moderately optimistic,” Wang said. “Entrepreneurs overall were still confident that the Covid-19 epidemic will be brought under control, though some remained concerned about a resurgence of Covid-19 in the future.”

Employment in the services sector fell moderately in May, with the rate of job losses at the fastest since February 2021, the data showed, indicating that the pandemic’s impact is gradually spreading to the labor market and that companies are not much inclined to hire, Caixin said.

The Caixin purchasing managers’ index for manufacturing contracted for a third month in a row in May at 48.1, gaining from 46 in April, which was also a 26-month low, according to the findings of a Caixin published on June 1.

Editor: Futura Costaglione