Chinas manufacturing activity recovered in August as new orders returned to growth, driving faster production growth, data from S&P Global showed on Monday.
The Caixin manufacturing Purchasing Managers Index rose to 50.4 in August from 49.8 in July.
Although the score signaled that the manufacturing sector improved following the brief deterioration, the rate of improvement was only marginal.
The official PMI survey data released over the weekend showed that the manufacturing sector contracted again in August. The PMI fell to 49.1 from 49.4 in July. At the same time, the non-manufacturing PMI rose slightly to 50.3 from 50.2 a month ago.
Manufacturing production increased for a tenth consecutive month in August driven by firms in the consumer and intermediate goods sectors, data from S&P Global showed. Incoming orders returned to growth on better underlying demand conditions and promotional efforts.
On the other hand, due to weak external demand, export orders dropped in August. Export orders fell marginally for the first time in the year-to-date period.
The improvement in demand led to a stabilization of staffing levels following an 11-month period of decline with some firms taking on additional staff to cope with ongoing workloads.
Meanwhile, purchasing activity fell marginally as manufacturers had sufficient input stock holdings. Lead times lengthened at a slightly faster pace amidst supply and transportation constraints.
Average input costs decreased fractionally for the first time in five months. Respondents linked the decline to the lowering of raw material prices. In turn, manufactures reduced their selling prices.
Confidence strengthened to a three-month high in August as firms grew more optimistic that improvements in economic conditions and business development efforts will bear fruit in the year ahead.
Caixin Insight Group senior economist Wang Zhe said the challenges and difficulties in stabilizing growth over the coming months will be substantial.
There is still room for fiscal and monetary policy adjustments, Zhe added. There is an increasingly urgent need for China to enhance policy support and ensure the effective implementation of earlier policies, the economist said.