A private gauge of China’s factory activity swung to expansion in August, thanks to improved supply and market demand.

The China Caixin manufacturing purchasing managers index rose to 51.0 in August from 49.2 in July, according to data released Friday by Caixin Media Co. and S&P Global.

The rebound came after the index stayed below the 50 mark, which separates activity expansion from contraction, for just one month in July.

Subindexes tracking total new orders and factory output both returned to expansionary territory in August, despite the impact of the extreme heat on some manufacturers’ production. Export orders improved but still stayed below 50, weighing on Chinese manufacturers’ performance, said Caixin.

The subindex tracking employment in the manufacturing sector entered expansionary territory for the first time in six months and hit the highest level since March 2010.

“In August, the manufacturing sector showed overall improvement. Apart from sluggish exports, the gauges for supply, total demand, and employment were all in expansionary territory,” said Wang Zhe, a senior economist at Caixin Insight Group.

China’s official manufacturing PMI also reflected the same improvement trend in August, although the government’s gauge was still in contraction territory, improving from 49.3 in July to 49.7.

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Caixin Insight Group’s Wang said insufficient domestic demand and the weak economic outlook “may form a vicious cycle for a longer period of time.”

“Stabilizing expectations and increasing household income should still be the policy focus,” he said.


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