China's manufacturing sector activity in August expanded at the weakest pace since June 2017 as new export orders slowed and U.S.-China trade row concerns continued to weigh on business sentiment, data from Caixin and IHS Markit showed.
The seasonally adjusted Caixin/Markit Manufacturing Purchasing Managers' Index slid to a 14-month low of 50.6 in August from 50.8 in July. The August PMI also marked its third straight monthly drop. Still, the reading remained above 50 points, which points to expansion.
"The sub-indexes for new orders and output both remained in expansionary territory, with the former falling and the latter climbing up. This showed cooling demand and strong supply existed at the same time across the manufacturing sector," said Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group.
Notably, new business rose at the slowest pace in 15 months while export sales fell for the fifth straight month as foreign demand weakened.
Chinese manufacturers reported further staff reductions due to corporate restructuring and cost-cutting measures, with the rate of job reductions picking up from July but still moderate overall.
Input costs increased at the second-sharpest rate in seven months due to higher raw material costs, leading to a further rise in average charges for manufactured goods.
Manufacturers' optimism for future production remained relatively subdued and was little changed from the six-month low seen in June amid worries over U.S.-China trade tensions and softer demand conditions.
"Generally speaking, the manufacturing sector continued to weaken amid soft demand, even though the supply side was still stable," said Zhong, but expressed doubt that stable supply can be sustained amid weak demand.
"In addition, the worsening employment situation is likely to have an impact on consumption growth. China's economy is now facing relatively obvious downward pressure," he added.
The Caixin/Markit gauge tracks smaller, private companies. The official China PMI, which inched up to 51.3 in August from 51.2 in July, focuses on larger, state-owned companies.