China Aug Caixin Mfg PMI Highest Since Feb On Robust Exports

     BEIJING (MNI) - Operating conditions in China's manufacturing sector

improved in August, led the strongest rise in new business in over three years

and a healthy gain in new export sales, according to the latest Caixin

Manufacturing Purchasing Managers' Index (PMI) released Friday.

     The headline manufacturing PMI rose to 51.6 in August from 51.1 in July and

was also well  above the 50.0 reading last July, according to data compiled by

IHS Markit for Caixin. 

     The index has risen three consecutive months, with the August reading the

strongest since  51.7 in February.  

     Readings above 50 indicate expansion in the manufacturing sector while

readings below 50 indicate contraction. The higher the PMI reading above 50, the

faster the expansion in the sector. The lower the reading below 50, the faster

the contraction.

     The rise in the Caixin index -- which focuses on smaller and medium-size

companies -- was in line with the results of the official manufacturing PMI

jointly released on Thursday by the China Federation of Logistics and Purchasing

and the National Bureau of Statistics. The CFLP/NBS PMI came in above

expectations at 51.7 in August, the second highest level this year after 51.8 in

March, due mainly to robust input and output prices.

     The Caixin index showed that new business expanded at fastest pace for 37

months due to a broad-based upturn in foreign demand. "The pickup was

highlighted by the sharpest increase in export sales since March 2010," Caixin

said. 

     As a result, manufacturers increased output at almost the same pace as in

July, which was the highest in five months.

     To fulfil new orders, survey participants said they accelerated buying

activity during August. The growth purchases was the fastest seen for over three

years, Caixin said, adding that input stocks rose, while inventories of finished

goods declined at the fastest rate since May 2016.

     The average time taken for input delivery lengthened in August to the

largest since January, with input providers delaying delivery times due in part

to stricter environmental policies, Caixin noted.

     The backlog of work increased in August to the highest this year.

     Companies continued to take a relatively cautious approach to employment,

with staff numbers falling in August. 

     But inflationary pressures ticked up, with both input prices and output

charges rising at faster rates, Caixin warned.

     Input costs increased at the fastest pace in five months. Manufacturers

complained about higher raw material prices, so companies raised output prices

to an eight-month high.

     "Overall operating conditions of the manufacturing sector improved further

as market demand strengthened," said Zhong Zhengsheng, director of Macroeconomic

Analysis at CEBM Group, a research subsidiary of Caixin.  However, he warned

that "if prices rise too quickly the profitability of companies in the middle of

a supply chain will come under pressure."

     The Caixin Manufacturing PMI is based on data compiled from monthly replies

to questionnaires sent to purchasing executives at more than 500 manufacturing

companies.

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com

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