Mark Schlarbaum visiting the Shanghai Stock Exchange

China services and manufacturing PMIs expanded in August

Factory activity in China expanded at its fastest pace in nearly two years in August, an official survey showed Thursday, although analysts cautioned that the world’s second-largest economy wasn’t out of the woods yet.

The official manufacturing Purchasing Managers’ Index (PMI), which mainly tracks large state-owned companies, rose to 50.4 last month, the highest reading since October 2014. August’s print was well above Reuters estimates for a 49.9 result and beating July’s reading of 49.9 and the 50.0 logged in June.

A number above the 50-level indicates growth, while one below 50 suggests contraction.

“The latest manufacturing PMI reading is encouraging, with caveats. While light manufacturing has improved, heavy manufacturing apparently remains in contraction. Given the latter is slightly larger in industrial output, it mutes the potential upside from the most recent improvement,” commented Brian Jackson, China economist at IHS Global Insight.

Another PMI survey focused on small and mid-sized firms by Markit/Caixin came in at 50 last month, slightly missing estimates for 50.1 and below July’s 50.6 reading. A third survey meanwhile revealed the official services PMI fell to 53.5 in August, down from 53.9 in July.

Market reaction was mixed following the data. Benchmark equity indices in Shanghai and Hong Kong were modestly lower but the Australian dollar ticked up 0.3 percent against the greenback.

While economists cheered the fact that all three figures were above 50, they warned China-watchers to contain their excitement.

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MARK SCHLARBAUM - Experienced in China - US business partnerships. Never giving up for those that never stop fighting! Help me join the fight against blood cancer and reach my fundraising goal! Visit My Fund Raising Page