China’s manufacturing sector posts growth in August

China’s manufacturing sector continued to expand 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 the overall operating conditions. 
 
The August survey data signalled a solid rise in total new work placed with Chinese manufacturers, with the rate of expansion the quickest seen for 37 months. A broad-based upturn in foreign demand was cited by panelists as a key driver of new order growth. This was highlighted by the sharpest increase in export sales since March 2010. Sustained growth in new orders led firms to expand their production schedules again in August. 
 
Furthermore, the rate of growth was little changed from July’s five-month high. Staff numbers continued on a downward trend in August, though the rate of job-shedding softened since July. 
Average input costs rose to the greatest extent in five months in August. Consequently, output prices rose at a solid pace that was the fastest in 2017 to date.