Activity levels across China’s manufacturing sector continue to improve.
The Caixin-IHS Markit manufacturing Purchasing Managers Index (PMI) rose 0.5 points to 51.6 in August, leaving it at a six-month high.
This PMI measures changes in activity levels across China’s manufacturing 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 that in August, not only did activity levels improve, they did so at the fastest pace since February this year.
It also mirrored the performance of the separate manufacturing PMI released by the Chinese government earlier this week which increased to 51.7, above the 51.4 level of July.
Both surveys continue to point to a modest improvement in activity levels.
IHS Markit said the improvement was underpinned by a surge in new orders which jumped to the highest level in three years.
“Firmer foreign demand was a key driver of new order growth, with export sales rising to the greatest extent in over seven years in August,” the group said.
“As a result, companies expanded their production schedules and buying activity, while business confidence rose to its highest for five months.”
As a lead indicator, the lift in new order growth suggests activity levels will remain firm in the months ahead.
Accompanying the lift in new order growth, IHS Markit said that both input and output prices rose strongly during the month, suggesting that higher commodity prices are now resulting in downstream price pressures to customers.
“Average input costs rose to the greatest extent in five months in August,” the group said.
“Survey respondents widely commented on higher prices for a broad range of raw materials in the latest survey period. Consequently, output prices rose at a solid pace that was the fastest in 2017 to date.”
Early next week, markets will receive separate services and composite PMI reports from IHS Markit, providing a health check on the broader Chinese economy.
Outside of China, PMI reports from across the Asian region offered a mixed bag in August.
Japan’s reading fell to 52.2 from 52.8, while South Korea’s reading rose to 49.9 from 49.1 in July. Taiwan, at 54.3, has recorded the strongest performance to date, although there are still a raft of other reports to come, including from India.