China’s private sector expanded at the strongest pace in six months in August underpinned by increased activity at both manufacturers and services providers.
The Caixin composite output index rose to 52.4 in August from 51.9 in July, survey data from IHS Markit showed Tuesday. A score above 50 indicates expansion in the sector.
Services companies registered the fastest upturn in business activity for three months in August. The Purchasing Mangers’ Index came in at 52.7, up from 51.5 in July.
The latest increase in new work among service providers was the fastest seen in three months and solid overall.
At the same time, new order in manufacturing gained at the greatest extent in over three years. As a result, composite new business increased at the joint-quickest pace in 2017 to date.
Stronger growth of activity and new orders led service providers to lift their payrolls again in August. Meanwhile, manufacturers reported a further reduction in headcounts.
At the composite level, employment stabilized in August, thereby ending a four-month sequence of decline.
Manufacturers and services companies in China both reported higher amounts of outstanding work during August that was in turn linked to greater new order intakes.
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Cost burdens continued to rise at a sharper pace at manufacturers than service providers in August. The rate of input price inflation at goods producers accelerated to five-month high. In contrast, average input prices climbed at a marginal rate at services firms.
Prices charged by Chinese services firms declined in August amid reports of greater market competition. On the other hand, manufacturers increased their factory gate charges at a solid rate.
After dipping in July, overall business confidence in China picked up slightly in August. 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.
“The recovery in both manufacturing and services has led the economic outlook to continue to improve,”Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group, said.
“But we need to closely watch whether the recent rises in input costs will weigh on corporate profits and fuel inflation.”