China's manufacturing activity rebounded in August, as new orders showed growth, propelling a quicker pace of production, according to data released by S&P Global on Monday.
The Caixin Manufacturing Purchasing Managers' Index rose to 50.4 in August, up from 49.8 in July. While this marked an improvement in the manufacturing sector following a brief downturn, the rate of progress remained modest.
Official PMI survey data released over the weekend indicated that the manufacturing sector contracted again in August, with the PMI dropping to 49.1 from 49.4 in July. Conversely, the non-manufacturing PMI showed a slight rise, reaching 50.3 from 50.2 in the previous month.
Manufacturing output increased for the tenth consecutive month in August, driven by firms in both consumer and intermediate goods sectors, as per S&P Global data. The return to growth in incoming orders was attributed to improved demand and promotional efforts.
However, weak external demand led to a decrease in export orders in August, marking the first marginal drop in the year-to-date period.
The uptick in demand resulted in the stabilization of staffing levels after an 11-month decline, with some firms hiring additional staff to manage ongoing workloads.
Meanwhile, purchasing activity saw a slight decline, as manufacturers maintained sufficient input stock levels. Lead times increased moderately due to supply and transportation constraints.
Average input costs decreased fractionally for the first time in five months, with respondents attributing this to falling raw material prices. Consequently, manufacturers reduced their selling prices.
Business confidence reached a three-month high in August, with firms growing more optimistic about the positive impact of improving economic conditions and business development initiatives in the coming year.
Wang Zhe, senior economist at Caixin Insight Group, highlighted the significant challenges ahead in stabilizing growth over the coming months.
"There remains scope for fiscal and monetary policy adjustments," Zhe noted. "China urgently needs to enhance policy support and ensure the effective implementation of earlier policies," the economist emphasized.
