China's manufacturing sector showed tentative signs of stabilization in August, with the official Purchasing Managers' Index rising to 49.8 from 49.2 in July, according to data released by the National Bureau of Statistics on Monday. The increase, which exceeded a Reuters poll forecast of 49.6, kept the index below the 50-mark that separates expansion from contraction for a fourth consecutive month.
The non-manufacturing PMI, which encompasses services and construction, remained flat at 49.0 in August, matching July's reading and marking the weakest level since December 2022. The sustained slump in services activity—driven primarily by domestic demand—points to a recovery that remains uneven across China's economy.
Sub-indices for new orders and production both returned to expansion territory above 50 in August, signaling a modest rebound in factory activity. However, broader economic indicators released earlier in the month suggest growth is still under pressure. Goods consumption and industrial production slowed at the start of the second half of the year, while fixed-asset investment extended its decline. The beleaguered real estate sector, mired in a downturn for more than five years, has yet to show meaningful signs of recovery.
Economists cited mixed signals in the data. Xu Tianchen, Senior Economist at the Economist Intelligence Unit, noted that any improvement in domestic demand appeared tied more to artificial intelligence-related sectors and exports than to policy-driven expansion. Lynn Song, Chief Economist for Greater China at ING, emphasized that the weak services PMI reflects persistently soft domestic demand, suggesting another month of subdued domestic activity ahead.
The mixed PMI readings follow a broader trend of uneven economic momentum in China, with pockets of resilience in manufacturing contrasting against lingering weakness in consumer-facing and property-linked segments.
