Manufacturing sector expands at solid pace in August

By IHS Markit

China’s manufacturing sector continued to expand strongly in August, adding to signs of a further recovery in conditions after the coronavirus disease 2019 (COVID-19) virus outbreak earlier in the year. Production and new orders both expanded at sharper rates than in July, while firms reported the first increase in export sales in 2020 to date. Firmer demand conditions led to a sustained increase in purchasing activity, although the rate of expansion eased slightly since July. Meanwhile, staffing levels fell at only a fractional, hinting that employment was close to stabilisation as firms registered a further increase in backlogs of work.

Prices data meanwhile indicated softer increases in both input costs and output charges compared to the previous month. The headline seasonally adjusted Purchasing Managers’ Index ™ (PMI ™ ) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – rose from 52.8 at the start of the third quarter to 53.1 in August. The reading was indicative of a solid overall improvement in the health of the sector, and one that was the most marked since January 2011. Helping to lift the headline PMI were steeper increases in both output and new orders in August.

Total new work expanded at the sharpest rate since the start of 2011 amid reports of firmer client demand as the domestic and global economy continued to recover from the pandemic. Notably, manufacturers registered the first increase in new export sales since December 2019. Higher new business led to a further expansion of output. The rate of growth also picked since July and was the most marked since January 2011. Manufacturing employment in China edged closer to stabilisation in August. Staff numbers fell at a fractional pace that was the slowest in the year to date. While some firms cut staff numbers to contain costs, others mentioned increasing their headcounts due to rising workloads. Furthermore, a combination of reduced staffing levels and rising sales drove a solid increase in outstanding business.