Activity levels across China's economy just improved unexpectedly, according to the government

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  • Activity levels across China’s manufacturing and non-manufacturing sectors improved unexpectedly in August, defying expectations for slowdown.
  • The government’s manufacturing and non-manufacturing PMIs rose to 51.3 and 54.2 respectively, a slight improvement on the levels reported in July.
  • The improvement came despite the backdrop of mounting trade tensions and ongoing deleveraging push from Chinese policymakers.

Activity levels across China’s manufacturing and non-manufacturing sectors improved unexpectedly in August, defying expectations for slowdown.

The government’s manufacturing purchasing managers index (PMI) rose to 51.3 in seasonally adjusted terms, a modest improvement on the 51.2 level reported in July.

The modest improvement snapped a two-month deceleration in the index from 51.9 in May.

Mirroring the trend in the manufacturing gauge, the separate non-manufacturing PMI released by the government also improved, lifting to 54.2 in August, up 0.2 percentage points from a month earlier.

That was a modest lift after activity levels improved at the slowest pace in 11 months in July.

PMIs measure perceived changes in activity levels across a specific sector from one month to the next.

Anything above 50 signals that activity levels are improving while a reading below suggests they’re deteriorating. The distance away from 50 indicates how quickly activity levels are expanding or contracting.

That means activity levels, according to the government, registered a modest improvement in August.

The reaction to the release has been muted, as has been the case for several years, with markets seemingly favouring separate China PMI reports from IHS Markit given they are conducted by a private sector firm.

They will be released in the early stages of next week.

The surprise bounce in both of the government PMIs came despite mounting trade tensions between China and the United States in recent months with both nations slapping tariffs on the others exports.

On Thursday, US President Donald Trump wanted to move forward with tariffs on another $US200 billion worth of Chinese imports to the US as soon as early September, a move the Chinese have already pledged to retaliate to should they go into effect.

The improvement in activity levels also defies a push from Chinese policymakers to encourage deleveraging across its industrial sectors, something that previously acted to cool activity in prior months.

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