Key benchmarks of Chinese manufacturing strength out on Thursday for August held above contraction territory in tandem for the first time in almost two years, with government data beating forecasts after a surprise July blip.
The National Bureau of Statistics' manufacturing purchasing managers' index, which polls large state-owned enterprises with a bias towards heavy industry, rose to 50.4 after unexpectedly dipping below the neutral 50 threshold that separates expansion from contraction in July. Analysts had expected the index to hold steady at 49.9. The NBS' non-manufacturing PMI, which captures services-industry strength, slipped to 53.5 from 53.9 as the construction-sector sub-index declined.
The private-sector Caixin/Markit manufacturing PMI index slipped to 50.0 from 50.6, below the 50.1 reading analysts had expected. It was the first time both the government and the Caixin/Markit indices recorded readings of 50 or more at the same time since November 2014.
"This ought to boost sentiment and suggests that earlier policy easing is still being supportive of economic activity ," noted Capital Economics China economist Julian Evans-Pritchard.
The mildly disappointing Caixin/Markit PMI came after unexpected strength in July, when the index crossed the critical 50 threshold for the first time in 17 months. But Evans-Pritchard said the August fall "isn't particularly concerning."
He noted that the government and the Caixin/Markit data sets were at odds with each other in certain areas, with the Caixin index pointing to slower growth in output and new orders, and the NBS release stating the opposite.
But both suggested a step-up in foreign demand and showed that factory-gate prices were no longer falling, he said.
"Overall, today's PMI readings paint a fairly reassuring picture about the current state of China's economy and fit with our long-running view that earlier policy stimulus ought to be sufficient to shore up growth until the end of this year," he said.
Chinese stock indices were largely in negative territory on Thursday, with the CSI 300 composite index down 0.34% at 3,316.55 towards the end of the trading day.
News of a stabilization in factory-gate prices, an early element in the inflation chain, comes after July consumer price growth slipped to 1.8%, well under the government's target of about 3%.
In the Caixin/Markit report on Thursday, CEBM economist Zhengsheng Zhong, noted that the July uptick in its manufacturing PMI had been "short-lived" and called for government support to stabilize growth.
"The index readings for output, new orders and stocks of purchases all declined from the previous month, with the index for inventories of purchases falling back to the territory of contraction," he noted. "The stagnation that follows tentative signs of recovery in July may have been caused by a temporary tightening of proactive fiscal policies. "