(Yicai) Aug. 1 -- Activity in China’s manufacturing sector fell last month for the first time since October, tipping into contraction territory, as demand shrank and production slowed, according to a widely watched private survey.

The Caixin manufacturing purchasing managers' index came in at 49.8 last month, down from a three-year high of 51.8 in June, according to data released today by financial media group Caixin. A reading below 50 indicates contraction.

The gauge is consistent with the official manufacturing PMI published on the same day by the National Bureau of Statistics, which contracted for the third consecutive month, dipping 0.1 point to 49.4. The NBS blamed seasonality, weak demand, and extreme weather for the decline.

“The most prominent issues are still insufficient effective domestic demand and weak market optimism,” said Wang Zhe, senior economist at Caixin Insight Group.

New orders fell, dropping below the 50 mark, for the first time since last August, mainly because of weak demand and clients' narrowing budgets, the Caixin poll showed. But external demand remained solid, as new export orders grew for the seventh month in a row, though at a slower pace.

Production expanded for the ninth straight month, but dropped close to the halfway mark, indicating limited output expansion.

The contraction in the manufacturing jobs market slowed, with the figure staying below 50 for the 11th consecutive month, as some companies hired workers to cope with future orders while others laid off staff amid a decline in new business.

Expectations for production and operations improved but remained below the long-term average. Even though the decline in new orders led to a drop in new business, firms still believe that expanding output and introducing new products will strongly support their sales.

“Stabilizing growth, promoting employment, ensuring people's livelihoods, increasing policy stimulus, supporting the effectiveness of previous policies, and stimulating market vitality and endogenous growth should be the key focuses of the policy work,” Caixin’s Wang noted.

Editor: Futura Costaglione