China’s factory activity improved in August, offering a tentative sign of stabilisation in the world’s second-largest economy, although the sector remained in contraction.
The official manufacturing purchasing managers’ index rose to 49.8 from 49.2 in July, moving closer to the 50-point threshold that separates expansion from contraction. The reading nevertheless indicates that factory activity continued to shrink, albeit at a slower pace.
The improvement came as production and new orders strengthened, while overseas demand also showed signs of improvement. That provided some support to manufacturers after a period of subdued domestic demand and persistent pressure on parts of the economy.
Bloomberg reported that the firmer factory reading offers a more hopeful signal for China’s growth outlook, while highlighting the uneven nature of the recovery.
However, weakness outside the manufacturing sector remains a concern. The non-manufacturing PMI held at 49.0, pointing to continued pressure on services and construction and underscoring the challenges facing domestic demand.
The latest figures suggest that China’s economy may be gaining some momentum, but the recovery remains fragile. Policymakers are likely to face continued pressure to bolster consumption and sustain growth as weakness in property and other parts of the economy persists.
