China’s Manufacturing PMI Rises to 49.8 in August, Stays Below 50 for Second Month
China’s manufacturing sector contracted for a second straight month in August even as the pace of contraction eased sharply from July, the National Bureau of Statistics said in data released on 31 August 2026. The official manufacturing Purchasing Managers Index climbed to 49.8 in August from 49.2 in July, a gain of 0.6 percentage points, but it remained below the 50 point mark that separates expansion from contraction.
Factory Activity Firms Even as Headline Stays Sub 50
The improvement was broad based among the manufacturing sub-indices. The production sub-index rose to 50.4 in August from 49.9 in July, an increase of 0.5 percentage points, moving back above the expansion threshold. New orders jumped to 50.6 in August from 48.5 in July, a gain of 2.1 percentage points, the sharpest monthly move among the five components and a sign that market demand for manufactured goods improved markedly. New export orders also returned above 50, reaching 50.1 in August compared with 49.6 in July. Two components stayed below the threshold: raw material inventories fell to 48.1 from 48.3, and the employment sub-index eased to 48.7 from 49.0, indicating factories continued shedding staff even as output and orders recovered. Supplier delivery times rose to 50.1 from 49.5.
By company size, large manufacturers led the rebound, with their PMI reaching 50.6, up 1.1 percentage points and above the 50 mark. Medium sized firms registered 49.4, down 0.3 percentage points, while small firms posted 47.9, up 0.5 percentage points but still the weakest of the three tiers.
Services and Construction Remain Under Pressure
Non-manufacturing activity showed less improvement. The Business Activity Index for non-manufacturing sectors held at 49.0 in August, unchanged from July and still below the expansion line. Within that reading, the construction Business Activity Index fell to 46.9, down 0.1 percentage points, while the services Business Activity Index was flat at 49.3. New orders for non-manufacturing businesses slipped to 44.1, down 0.3 percentage points, as services new orders fell to 44.5 while construction new orders rose to 42.4. Employment in non-manufacturing sectors was unchanged at 45.4, still well below 50, pointing to continued weak hiring in services and construction.
Composite Output Index Edges Higher
The Composite PMI Output Index, which combines manufacturing production with non-manufacturing business activity, rose to 49.5 in August from 49.3 in July, an increase of 0.2 percentage points. The gain reflected the strength of the manufacturing production sub-index rather than any improvement in non-manufacturing activity, which was flat over the same period.
A Second Sub 50 Month, on Our Calculation
On our calculation, based on the National Bureau of Statistics’s own monthly data, the manufacturing PMI has now spent two consecutive months below the 50 point threshold, in July and August 2026. This is the second such two month contraction this year, following a similar dip in January and February 2026, when the index read 49.3 and 49.0 respectively. Both of those stretches remain far shorter than the 8 consecutive sub 50 months recorded from April through November 2025, when the index ranged from 49.0 to 49.8 before returning above 50 in December 2025 at 50.1. On our reading, August’s 49.8 also ties September 2025 as the strongest single month reading recorded while the index stayed under 50 during that 8 month streak, suggesting the current contraction, while persistent, has so far been milder and shorter than last year’s.
Why it matters: Manufacturing accounts for a large share of China’s output, exports and employment, and the PMI is the earliest monthly signal of whether factory activity is expanding or contracting. A headline reading below 50 for two straight months indicates the sector is still shrinking overall, even though the rate of contraction slowed markedly in August. The continued weakness in the manufacturing employment sub-index, together with a non-manufacturing sector that failed to improve at all in August, points to a labor market that is lagging behind the pickup in factory orders and output, a gap that matters for household income and consumption in the world’s second largest economy.
Outlook: The rebound in new orders and new export orders suggests demand conditions improved in August, which could support a return above 50 in coming months if the trend holds. The production and business activity expectations sub-index for manufacturers stood at 53.8 in August, and the equivalent expectations index for non-manufacturing firms was 55.0, both comfortably above the 50 point line, indicating businesses in both sectors remain more optimistic about near term activity than the current headline readings suggest. Continued weakness in the raw material inventory and employment components, however, points to caution among manufacturers about restocking and hiring until the recovery in demand proves durable.
Source: National Bureau of Statistics of China, jointly with the China Federation of Logistics and Purchasing
