BEIJING, (Reuters) – China’s service sector grew at a quicker pace in December due to higher demand and easing inflationary tensions. However, small-scale COVID-19 epidemics continue to weigh on the outlook. A private sector survey was released on Thursday.

Caixin/Markit’s Purchasing Managers Index (PMI), which rose from 52.1 in November to 53.1 in December, remained above the 50-point threshold that distinguishes between growth and contraction.

This survey, which is more focused on coastal firms, was compared with an official survey that also revealed a faster expansion of the services sector.

Analysts state that services, which took longer to recover than manufacturing from the pandemic, are more susceptible to anti-virus and sporadic COVID-19 infections. Tourism and leisure businesses were the hardest hit.

China has seen the majority of cases of this disease in recent years. The province of Shaanxi is the most affected. To stop further spread, the capital of Xian city was put under lockdown.

Survey results showed that firms’ input prices increased for the 18th straight month but at a slower pace. The sub-index of employment grew at the fastest rate since May and an indicator of new business increased.

Both supply and demand improved. New products contributed to a positive market mood, which led to increased business activity and new business for the fourth month in a row. “But surveyed businesses were concerned about disruptions caused scattered COVID-19 flare-ups,” Wang Zhe from CaixinInsightGroup, stated in a note attached to the data.

“Though the business expectation measure remained positive, it dropped to its lowest level since September 2020. It was also significantly lower than the long-term mean.”

Caixin’s December composite PMI (which incorporates both manufacturing activity and services activity), rose to 53.0 versus 51.2 last month.