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Financial News: China's Manufacturing Sector Expands On Production

China's Manufacturing Sector Expands On Production

09/02/2019 - 01:02:00 (RTTNews)

(RTTNews) - China's manufacturing sector recovered in August largely driven by the fastest growth in production in five months, survey data from IHS Markit showed Monday.

The Caixin factory Purchasing Managers' Index rose to 50.4 in August from 49.9 in July. A score above 50 indicates expansion.

The official manufacturing PMI dropped to 49.5 in August from 49.7 in July. Meanwhile, the non-manufacturing PMI improved to 53.8 from 53.7, data released over the weekend showed.

Markit showed that production grew at the fastest pace in five months but total new orders received was broadly stable. Improved domestic demand helped to offset a further reduction in export sales. Exports fell at the quickest pace since last November.

The improved production trend led firms to expand their purchasing activity further, while stocks of finished goods rose for the first time this year to date. Employment was broadly unchanged in August, following a moderate reduction in July. Reflecting reduced raw material prices, the rate of reduction in input costs was the joint-quickest since January 2016, the survey showed.

Lower cost burdens and efforts to stimulate sales led firms to cut their output charges at a quicker pace in August, with the rate of discounting the steepest since December 2015.

The degree of confidence among manufacturers weakened from July, largely due to concerns over the ongoing China-US trade dispute and signs of a slowing global economy.

China's economy showed signs of a short-term recovery, but downward pressure remains a long-term problem. Amid unstable Sino-American relations, China needs to step up countercyclical policies, Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group said.

Julian Evans-Pritchard and Martin Lynge Rasmussen, economists at Capital Economics, said the big picture is that the PMIs remain consistent with a renewed slowdown in year-on-year economic growth.

The fiscal support currently in the pipeline is unlikely to fully offset headwinds and authorities will have little choice but to roll out further policy easing measures in the coming months, the economists noted.

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