China's service sector grew at the fastest pace in seven months in December underpinned by greater business inflows, survey results from S&P Global showed on Monday.

The services Purchasing Managers' Index posted 52.2 in December, up from 51.5 in November. The score was forecast to climb to 51.7.

The services activity extended its expansion to two years. Moreover, activity growth accelerated the most since May.

Incoming new work grew at the fastest pace in five months on the back of promotional efforts and better underlying demand. Sales growth was supported by higher domestic demand as export business declined for the first time since August 2023.

Due to the increase in business inflows, outstanding work accumulated again. Meanwhile, employment declined for the first time since August even with intensifying capacity pressures.

On the price front, the survey showed that cost inflation intensified on higher input material and wage costs. Average selling prices increased for the first time since June as service providers shared rising cost burdens with clients. Finally, business sentiment remained positive as firms were generally hopeful that business development efforts and supportive government policies can support sales growth in 2025.

The survey showed that quicker services activity growth failed to offset softer manufacturing output expansion. The composite output index dropped to 51.4 in December from 52.3 in November.

Although, the sector extended the period of continuous expansion to 14 months, the pace of growth softened to its lowest level since September.

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