China August manufacturing PMI rises to 49.8 but stays below 50

China’s August manufacturing PMI rose to 49.8 from 49.2 in July, but the China August manufacturing PMI remained below 50 for a second consecutive month. The reading also exceeded the 49.6 median forecast in a Reuters poll reported by CNBC, offering a better-than-expected result without showing a broad return to expansion.

The National Bureau of Statistics reported the 0.6-point monthly increase on Aug. 31. CNBC described readings below 50 as contractionary. For investors watching Chinese demand and industrial activity, the report showed stronger production and orders alongside continued weakness in employment, input inventories and parts of the non-manufacturing economy.

What drove China’s August manufacturing PMI?

Several factory measures moved above 50 in August. The production index rose 0.5 point from July to 50.4, while new orders climbed 2.1 points to 50.6, according to the National Bureau of Statistics.

New export orders also improved, reaching 50.1 from 49.6 in July. That puts the export-orders measure above 50, while the imports index was 48.6.

Other components remained below 50. Raw-material inventories slipped 0.2 point to 48.1, and the employment index declined 0.3 point to 48.7. The official release reported those figures without identifying the reasons behind the moves.

• Manufacturing PMI: 49.8, up 0.6 point from July
• Production: 50.4, up 0.5 point
• New orders: 50.6, up 2.1 points
• New export orders: 50.1, up from 49.6
• Raw-material inventories: 48.1, down 0.2 point
• Employment: 48.7, down 0.3 point

Factory conditions also differed by company size. Large manufacturers posted a PMI of 50.6 after a 1.1-point increase. Medium-sized manufacturers registered 49.4, down 0.3 point, and small manufacturers came in at 47.9 despite a 0.5-point improvement, the statistics bureau said.

Within manufacturing, CNBC reported that production and new-orders readings in electronic machinery and equipment, as well as computer and communications-device industries, topped 53. Consumer-goods production registered 49, according to CNBC.

What did the release show beyond factories?

China’s non-manufacturing business-activity index held at 49.0 in August. Construction fell 0.1 point to 46.9, while services were unchanged at 49.3, the National Bureau of Statistics said. Its composite PMI output index, covering manufacturing and non-manufacturing activity, rose 0.2 point to 49.5.

The report supplies a more detailed read on production, orders, employment and construction at the end of August. Subsequent releases may offer further evidence on how those indicators change.

This story draws on original reporting from CNBC.