China's August Caixin PMI unexpectedly rises, strongest since Feb

China Caixin Manufacturing PMI for August came at 51.6 vs 50.9 exp and 51.1 last, with Caixin's summary noting that new business rose at quickest rate for over three years.

Summary:

China’s manufacturing sector remained in expansion territory in August, fuelled by the strongest increase in new business for just over three years. Firmer foreign demand was a key driver of new order growth, with export sales rising to the greatest extent in over seven years in August. As a result, companies expanded their production schedules and buying activity, while business confidence rose to its highest for five months. However, stricter environmental policies were a key factor leading to longer delivery times, whilst inflationary pressures intensified as input costs and output charges both rose at faster rates.

The seasonally adjusted Purchasing Managers’ Index™ (PMI™) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – registered 51.6 in August, up from 51.1 in July to signal an improvement in overall operating conditions. The health of China’s manufacturing sector has now strengthened in each of the past three months, with the latest upturn the strongest since February.

Commenting on the China General Manufacturing PMI™ data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said: “The Caixin China General Manufacturing PMI rose 0.5 points to 51.6 in August, the second-highest reading of this year so far. It was also the third consecutive month that the index had posted in expansionary territory. Among the sub-indices: the output index dropped slightly but new orders continued growing. Both input costs and output prices rose further, with the latter hitting an eightmonth high. Inventories of finished goods dropped further and at a faster pace, but stockpiles of procured goods continued expanding in August. Overall operating conditions of the manufacturing sector improved further as market demand strengthens, but if prices rise too quickly the profitability of companies in the middle of a supply chain may be under pressure.”