China’s August PMI shows uneven stabilization

China’s official manufacturing purchasing managers’ index (PMI) reached 49.8 in August 2026, up 0.6 percentage points from July. The reading indicates a slower pace of contraction in factory activity but remains below the 50 level that separates expansion from contraction. The improvement suggests conditions in the industrial sector are stabilizing after previous months of weaker performance.

The rise in the headline manufacturing PMI also exceeded some economists’ expectations for August. Nonetheless, the sub-50 level means manufacturing activity as a whole is still shrinking on a month-on-month basis, even as the rate of decline has narrowed.

Key sub-indices within the manufacturing survey showed more positive momentum than the headline figure. The production index climbed to 50.4 in August 2026, moving back into expansion territory. This return to growth in output signals that factories increased their level of activity compared with the previous month.

New orders improved more strongly, with the index rising to 50.6 in August 2026. This places demand back above the 50 threshold and indicates that manufacturers received more orders than in July. The upturn in new orders is an important sign of firmer underlying demand for manufactured goods.

The procurement, or purchasing, volume index also shifted into expansion, reaching 50.5 in August 2026. An expansionary reading for procurement suggests manufacturers are increasing their purchases of inputs and raw materials, consistent with expectations for ongoing or higher production.

While manufacturing showed signs of stabilization, activity in services and construction did not strengthen in August. The non-manufacturing PMI came in at 49.0 in August 2026, unchanged from July. This indicates that sectors such as services and construction continued to contract at a similar pace.

The composite PMI, which combines manufacturing and non-manufacturing activity, edged up to 49.5 in August 2026 from 49.3 in July. Despite the slight improvement, the composite index stayed below 50, pointing to an economy that overall remains in contractionary territory.

Taken together, the August 2026 PMI data show a divergence between a stabilizing manufacturing sector and still-weak non-manufacturing activity. Rising production, new orders and procurement within manufacturing suggest that industrial demand has started to firm. At the same time, the unchanged non-manufacturing PMI highlights ongoing softness in services and construction, limiting the breadth of any recovery.

The modest increase in the composite PMI reflects these mixed signals: factory conditions are improving but not enough to pull the broader index into expansion. The latest figures therefore portray an economy in which industrial momentum is strengthening from low levels, while the overall growth picture remains subdued.