China's manufacturing activity shrank for the fourth consecutive month in August as production and new orders slipped from prior-month levels amid the ongoing trade dispute between the U.S. and China that has dented business sentiment and global economic growth.
The National Bureau of Statistics on Aug. 31 showed that the purchasing managers' index fell to a 49.5 reading in August from 49.7 in July.
Production and new orders edged down to 51.9 and 49.7 from 52.1 and 49.8, respectively.
However, a survey compiled by Caixin and IHS Markit showed that Chinese manufacturing activity improved in August as strong domestic demand offset declining exports, which fell at the quickest pace since November 2018.
The headline seasonally adjusted purchasing managers' index improved to 50.4 in August from 49.9 in July. The reading, slightly above the 50-point mark that separates contraction from expansion, marked the fastest improvement in the overall health of the sector since March.
Production rose at the fastest pace in five months, while stocks of finished goods rose for the first time this year.
Factory firms expect output to rise over the next year, but the degree of optimism weakened amid concerns about the ongoing U.S.-China trade tensions and global economic slowdown.
"China's manufacturing sector showed a recovery in August, mainly due to improved production activity," said Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group. "However, overall demand didn't improve, and foreign demand declined notably, leading product inventories to grow."
"Amid unstable Sino-American relations, China needs to step up countercyclical policies."
