2026.08.3101:34:40UTC+00China Factory Activity Shrinks Less Than Expected

China’s official NBS Manufacturing PMI rose to 49.8 in August 2026 from 49.2 in July, marginally beating market expectations of 49.7. Despite the improvement, it signaled a second straight month of contraction in factory activity, reflecting persistently weak domestic and external demand as well as disruptions from extreme weather.

On the output side, production returned to expansion territory (50.4 vs 49.9 in July), and overall new orders also rebounded, expanding after a contraction in the previous month (50.6 vs 48.5). New export orders likewise moved back into expansion (50.1 vs 49.6), suggesting a modest recovery in external demand.

Labor market conditions remained soft, with the employment subindex still in contraction (48.7 vs 49.0). By contrast, purchasing activity picked up and moved back into expansion (50.5 vs 49.4), while supplier delivery times shortened for the first time in seven months (50.1 vs 49.5), indicating some easing of supply-side pressures.

On the price front, input cost inflation accelerated to a three-month high (56.6 vs 53.2), and output prices increased after declining in the previous month (50.4 vs 47.8), pointing to rising cost pressures being passed on, at least in part, to customers.

Business confidence weakened slightly, with the sentiment index slipping to its lowest level in five months (53.8 vs 54.1), suggesting that firms remain cautious about the near-term outlook despite the modest improvement in headline activity indicators.