China's corporate sector is looking good as new orders continue to roll in

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China’s economy enjoyed another strong month in August, according to the views of business operators.

The Caixin-IHS Markit China composite purchasing manager index (PMI) — a measure on activity levels across the nation’s manufacturing and services sectors — rose to 52.4 in August from 51.9 in July, leaving it at a six-month high.

This PMI measures changes in activity levels 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 suggests that not only did activity levels improve last month, they did so at the fastest pace since February this year.

Source: IHS Markit

Like the separate manufacturing and non-manufacturing PMI reports released by the Chinese government last week, this private sector survey suggests the economy is humming along nicely as we approach year-end.

“August data revealed that the latest expansion of overall business activity was underpinned by increased activity at both manufacturers and services providers,” said IHS Markit.

“Notably, services companies registered the quickest upturn in business activity for three months.”

The PMI from IHS Markit measuring services sector activity rose to 52.7 last month, an improvement on the 51.5 level of July. Over the same period, the manufacturing PMI rose 0.5 points to 51.6, also a six-month high.

IHS said the improvement in the composite PMI was driven by a pickup in new orders, a good sign on the outlook for activity levels in the months ahead.

“Growth in new business accelerated in the service sector midway through the third quarter,” the group said.

“The latest increase in new work was the fastest seen in three months and solid overall, with a number of companies linking growth to improving market conditions and new marketing strategies.”

That followed a surge in new manufacturing orders which hit a three-year high during the month. Reflecting an increase in new work, order backlogs and employment also increased.

As a result of those positive trends, sentiment levels looking 12-months ahead also improved after dipping in July.

“The improvement was driven by stronger optimism across both the manufacturing and service sectors, with the latter expressing the most marked degree of positive sentiment,” IHS Markit said.

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