China's factory activity contracts again in August

Factory activity in China contracted in August for the fifth month in a row, according to data released on Thursday by the National Bureau of Statistics.

The official manufacturing purchasing managers' index rose to 49.7 from 49.3 in July, remaining below the 50.0 mark that separates contraction from expansion. Economists were expecting a reading of 49.2.

Meanwhile, the non-manufacturing PMI declined to 51.0 in August from 51.5 in July, versus consensus expectations of 51.2.

Sheana Yue, China economist at Capital Economics, said: "The PMI surveys suggest a slight improvement in economic activity in August. Downward pressure on manufacturing appears to have eased, while construction activity accelerated. These have more than offset a further softening in services activity.

"But overall economic momentum remains weak and more policy support is needed to avoid a renewed slowdown later this year."

Pantheon Macroeconomics said: "Overall, the latest PMI data indicates tentative signs of stabilisation in manufacturing activity, with new orders and production expanding again in August. Out of the 12 components, 10 of them are showing a rising reading, albeit 6 are still below the key level of 50.

"Looking ahead, manufacturers are still less optimistic about the future, as indicated by the business activity expectation sub-index, which is still below its historical average. This lack of confidence is reflected in low intention to hire more staff, with the employment component falling to the lowest level since February this year."