(Yicai) Sept. 3 -- Activity in China’s manufacturing sector returned to increase last month after contracting for the first time in nine months in July, according to a widely watched private survey.

The Caixin manufacturing purchasing managers’ index came in at 50.4 in August, up from 49.8 the month before, according to data released yesterday by financial media group Caixin. A reading above 50 indicates expansion.

The gauge is not in line with the official manufacturing PMI published yesterday by the National Bureau of Statistics, which contracted for the fourth consecutive month to 49.1, the lowest since February. The NBS blamed seasonality and extreme weather for the decline.

“Overall, the manufacturing sector improved in August, marked by a stable expansion in supply and demand,” said Wang Zhe, senior economist at Caixin Insight Group. “External demand was under pressure while employment stabilized, logistics were delayed, manufacturer inventories increased along with deflationary pressure, and market optimism was generally resilient.”

The manufacturing production sub-index remained in expansion territory for the 10th consecutive month in August, led by firms in the consumer and intermediate goods sectors.

New orders returned to growth last month after contracting in July for the first time in 11 months, mainly thanks to improved basic demand and promotional measures. However, export orders were subdued, falling slightly for the first time in one year because of reports of deteriorating external conditions.

Employment remained steady in August as the labor market stabilized after an 11-month contraction, according to Wang. “The number of companies increasing their headcount was roughly equal to those reducing it to cut costs.”

Expectations for production and operations continued to improve for the second month after falling to the lowest since December 2019 in June but remained below the long-term average. Firms believe that business expansion, new product releases, improved economy, and other factors will help them improve sales.

“The Caixin manufacturing PMI for August returned to expansionary territory, but the growth was limited,” Wang said. “Considering the government’s ambitious annual economic growth target, the challenges and difficulties in stabilizing growth over the coming months will be substantial.

“Prominent issues, such as insufficient domestic demand, significant uncertainties in external demand, and weak market optimism, persist,” he noted. “There is an increasingly urgent need for China to enhance policy support and ensure the effective implementation of earlier policies.”

Editor: Futura Costaglione