China’s factory activity unexpectedly picks up in August, but too early to tell if recovery will last

Caixin/S&P Global manufacturing purchasing managers’ index (PMI) rose to 51 in August from 49.2 in July

China’s official manufacturing PMI also rose to 49.7 in August from 49.3 in July, but remained in contraction territory for the fifth month in a row

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China’s Caixin/S&P Global manufacturing purchasing managers’ index (PMI) rose to 51 in August from 49.2 in July, data released on Friday showed. Photo: Xinhua

Published: 10:22am, 1 Sep 2023

China’s factory activity surprisingly returned to expansion in August, a private-sector survey showed on Friday, with supply, domestic demand and employment improving, suggesting official efforts to revive growth might be having some effect.

The Caixin/S&P Global manufacturing purchasing managers’ index (PMI) rose to 51.0 in August from 49.2 in July, beating analysts’ forecasts of 49.3 and marking the highest reading since February. The 50-point index mark separates growth from contraction.

The data, a snapshot of the sprawling manufacturing economy, surprised to the upside but offered a mixed picture of the sector, a day after an official survey showed manufacturing activity contracted for a fifth straight month.

The Caixin manufacturing PMI surveys around 650 private and state-owned manufacturers and focuses more on export-oriented firms in coastal regions, while the official PMI surveys 3,200 companies across China.

Analysts said it is too early to tell if the world’s second-largest economy has recovered meaningfully as a worsening property downturn and weakness in household consumption prompt expectations of more stimulus.

Manufacturers reported increases in both output and total order intakes thanks to firmer market demand, the Caixin survey showed.

The upturn in sales contrasts with deepening declines in new export orders, suggesting stronger domestic demand was the main source of growth.