World Economy

China official manufacturing PMI is 51.7 for August, above expectations

Key Points
  • Economists were expecting China's official manufacturing Purchasing Managers' Index to come in at 51.3 for August, according to a poll by Reuters
  • The official manufacturing number came in at 51.7 for the month
Workers at the Zhong Tian (Zenith) Steel Group factory in Changzhou, Jiangsu.
Kevin Frayer | Getty Images

China reported Thursday that its official manufacturing Purchasing Managers' Index for the month of August came in at 51.7 — above expectations.

Analysts polled by Reuters expected China to post official PMI of 51.3 for August, a tick down from .

A reading above 50 indicates expansion, while a reading below that signals contraction.

China's manufacturing sector has been posting solid growth thanks to domestic infrastructure spending and a recovery in exports. That has mitigated some concerns about slowing growth and high debt levels that could derail the world's second-largest economy.

The uptick in August was driven by strong production and a rise in new orders attributed to domestic demand, analysts said.

Many experts, however, still expect growth to slow in the second half of the year as the government cracks down on debt.

Capital Economics China Economist Julian Evans-Pritchard said even though the data showed industrial output defied a slowdown in the broader economy last month, that will not be sustainable.

"We suspect that this partly reflects speculation over future capacity cuts which have pushed up the price of key industrial metals, in turn encouraging a step-up in production of these metals," he wrote in a note after the release of the data.

"But if we are right to believe that tighter policy will continue to weigh on investment spending in the coming quarters, then we doubt that the current pace of industrial output growth can be sustained for long," Evans-Pritchard added.

Nomura analysts are also keeping their call on a gradual economic slowdown due to signs of a cooling property market and slowing export growth.

Official services PMI meanwhile fell to 53.4 in August from 54.5 in July, the lowest since May 2016.

While the manufacturing PMI data tends to be more closely watched, China's pivot toward domestic consumption and away from investment-led growth means the services sector accounts for a bigger slice of the mainland economy. The services sector includes consumer industries such as real estate, retail and leisure.

Another set of PMI readings will be published on Friday as Caixin/Markit release their numbers.

Compared with the official PMI, the Caixin/Markit survey tends to focus more on small- and mid-sized manufacturers.