China’s Manufacturing Activity Contracts for a Second Straight Month

China’s manufacturing sector contracted for a second consecutive month in August, but the downturn weakened compared with July. The official purchasing managers’ index rose to 49.8 from 49.2, remaining below the 50-point line that separates contraction from expansion.

The reading broadly matched analysts’ expectations, although the most common forecast had stood at 49.7. Of the five sub-indexes making up the manufacturing PMI, production, delivery times and new orders moved above 50. New orders, a key indicator of demand, climbed 2.1 points to 50.6.

Employment and raw-material inventories remained in contraction. Huo Lihui, a statistician with China’s National Bureau of Statistics, said both supply and demand grew in machinery and electrical tools, as well as in computing, communications and electronic equipment.

Huo also pointed to rising industrial prices, driven mainly by higher crude oil costs and fluctuations in prices for non-ferrous metals such as aluminum. The changes have occurred as conflict in the Middle East affects supply chains, according to the report.

The official non-manufacturing PMI, which covers services and construction, stayed at 49 for a second month, its lowest reading since December 2022. Services remained unchanged at 49.3, while construction fell to 46.9. The statistics office attributed the construction decline to typhoons and heavy rain in several regions. The composite PMI rose to 49.5 from 49.3.