Infrastructure spending boosts China manufacturing PMI in August

Chinese manufacturing sector conditions strengthened in August amid higher levels of output, even as firms' confidence in the outlook registered one of its softest readings ever, the results of a closely-followed survey revealed.

Caixin's manufacturing sector Purchasing Managers' Index improved from July's reading of 49.9 to 50.4, defying economists' expectations for a dip to 49.8, as production levels rose at their fastest pace for five months.

And inventory levels increased for the first time in 2019.

New order intakes meanwhile were stable, despite a more rapid pace of decline in orders from overseas.

On the prices front, Caixin said that a fall in input costs led to a faster pace of decrease in output charges.

However, firms' confidence in the outlook 12 months ahead was "among the weakest in the series history" amid concerns over the future US-China trading relationship combined with signs of weaker conditions around the world.

Echoing that assessment, the official factory PMI decreased from a reading of 49.7 to 49.5 (consensus: 49.6).

"Stepping back, the big picture is that the PMIs remain consistent with a renewed slowdown in year-on-year economic growth. And clouds are still hanging over the outlook – global demand looks set to weaken further and a long-overdue pull-back in property construction is getting under way," said Julian Evans-Pritchard and Martin Lynge Rasmussen at Capital Economics.

"The fiscal support currently in the pipeline is unlikely to fully offset these headwinds and we think authorities will have little choice but to roll out further policy easing measures in the coming months."