China's private factory gauge unexpectedly returns to growth in August

China’s manufacturing activity unexpectedly moved back into expansion territory in August, according to a private survey, rebounding far more than forecast in contrast with an official poll.

 

The RatingDog China General Manufacturing Purchasing Managers’ Index rose to 50.5 from 49.5 in July, according to a statement released on Monday, above the 50 mark that separates contraction from growth. That exceeded every forecast in a Bloomberg survey of analysts, whose median estimate was 49.8.  

 

“The latest upturn resembled a breath of relief rather than a sustained rally,” Yao Yu, founder of RatingDog, said in the statement. “With weak domestic demand, potentially overstretched external orders, and slow profit recovery, the durability of the improvement depends on whether exports truly stabilize and whether domestic demand can pick up pace.” 

 

The results of the private survey were more upbeat than the official reading released Sunday, which showed factory activity remained stuck in contraction. 

  China’s economic momentum is weakening after solid growth in the first half of the year. A government crackdown on price wars is holding back production, with a worsening downturn in the housing market putting an additional drag on activity.  

 

China’s home sales extended their slump in August in what was one of the weakest months on record, even as prices declined. Excluding the pandemic year, the official construction PMI slumped to a record low last month. 

 

Economic growth stumbled in July even as trade ties with the US continued to stabilise after President Donald Trump extended a pause on higher tariffs for Chinese goods for another 90 days, into early November.

 

While new orders expanded at the fastest since March and helped manufacturing output grow in August, firms in the RatingDog survey attributed the improvement to stronger domestic demand rather than a better outlook for exports.

 

And in a sign that Beijing’s campaign against deflation is making some headway, selling prices ended their eight-month streak of discounting as average input costs rose at the fastest pace in nine months, according to the statement released by RatingDog and S&P Global. 

 

“The manufacturing sector is helping the recovery, but this rebound is patchy,” Yao said. “External demand looks partly pulled-forward while domestic demand stays soft.”