China Manufacturing Sector Expands For Fourth Month

China’s manufacturing activity expanded for the fourth straight month in August suggesting that the sector continued to recover from the impact of the coronavirus pandemic, survey data from IHS Markit showed Tuesday.

The Caixin manufacturing Purchasing Managers’ Index rose to 53.1 in August from 52.8 in July. The reading signaled a solid overall improvement in the health of the sector, and one that was the most marked since January 2011.

According to official survey, the manufacturing PMI fell marginally to 51.0 in August from 51.1, while the non-manufacturing PMI advanced to 55.2 from 54.2 a month ago.

IHS Markit survey revealed that manufacturing new orders expanded at the sharpest rate since the start of 2011 amid reports of firmer client demand as the domestic and global economy continued to recover from the pandemic. Notably, manufacturers registered the first increase in new export sales since December 2019.

Driven by higher new business, production expanded further. The rate of growth was the most marked since January 2011. At the same time, staff numbers fell at a fractional pace that was the slowest in the year to date.

Chinese manufacturers faced a further increase in average input costs in August. The rate of inflation remained solid overall amid reports of greater raw material costs. Consequently, companies partially passed on their higher operating expenses to clients in the form of higher selling prices.

Although firms generally expect output to rise over the next year, the degree of optimism edged down to a three-month low in August.

The survey data suggest that manufacturing growth has continued to pick up in recent weeks, despite having already returned to its pre-virus level at the end of the second quarter, Julian Evans-Pritchard and Sheana Yue, economists at Capital Economics, said.

In the near-term, continued policy stimulus is set to keep industrial growth strong, the economists added.

Macroeconomic policy supports are essential, especially when there are still many uncertainties in domestic and overseas economies, Wang Zhe, senior economist at Caixin Insight Group said. Relevant policies should not be significantly tightened.

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