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[caixin.com] after a brief contraction in july, china's manufacturing sector rebounded in august, with both supply and demand expanding but to a limited extent.

the caixin china manufacturing purchasing managers' index (pmi) for august, released on september 2, was 50.4, up 0.6 percentage points from july, returning above the boom-bust line.

the national bureau of statistics previously announced that the manufacturing pmi for august fell by 0.3 percentage points to 49.1, tied with february 2024 as the lowest level of the year, and has been below the boom-bust line for four consecutive months. (see:）

judging from the sub-item data of caixin china manufacturing pmi, the expansion of manufacturing industry has slightly accelerated, and demand has stopped falling and rebounded, but the improvement is not large. the production index rose slightly in the expansion range in august, and the new order index changed the contraction trend in july and returned to the expansion range. according to the interviewed companies, the growth of new orders was mainly due to the improvement of basic demand and various promotional measures.

previously resilient external demand weakened, with the new export order index falling below the critical point for the first time this year, the lowest since december 2023. the decline in export orders for consumer goods was the main drag.

after 11 consecutive months of contraction, manufacturing employment stabilized in august, with the employment index falling on the boom-bust line. the survey showed that the number of companies that increased employment and cut jobs to save costs roughly offset each other. among the three major categories, only investment goods manufacturers saw a significant increase in employment. stable employment failed to absorb the increase in new orders, and the backlog of work increased.

corporate purchasing activities slowed slightly in august, but raw material inventories increased slightly. delays in outbound freight led to an increase in finished product inventories, and the finished product inventory index has been in the expansion range for three consecutive months.

supply chain performance deteriorated in august due to tight supply and weather-related shipping delays, with the supplier delivery time index falling to the lowest level of the year in the contraction range.

as prices of raw materials such as industrial metals fell, the purchasing price index of raw materials fell below the critical point in august, ending the previous four-month expansion. after cost pressure eased, manufacturing companies stepped up price cuts and promotions, and the ex-factory price index fell to the lowest level in nearly four months in the contraction range.

after falling to its lowest level since december 2019 in june, the production and operation expectation index has rebounded for two consecutive months, but it is still below the long-term average. manufacturing companies generally believe that factors such as business expansion, new product launches and improved economic conditions will drive sales improvements.

wang zhe, senior economist at caixin think tank, said that the manufacturing boom recovered slightly in august, supply and demand expanded steadily, external demand was under pressure, employment stopped falling and leveled off, logistics and transportation were delayed, corporate inventories increased, deflationary pressure increased, and corporate optimism remained. caixin china manufacturing pmi returned to the expansion range but the expansion was limited. considering the more aggressive full-year economic growth target, it will be difficult and challenging to stabilize growth in the coming months. outstanding problems such as insufficient domestic effective demand, greater uncertainty in external demand, and weak optimistic expectations of market players still exist. there is still room for current fiscal and monetary policies, and the urgency of increasing policy support and promoting the implementation of previous policies has further increased.